[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
WASTE, ABUSE AND MISMANAGEMENT:
CALCULATING THE COST OF DHS FAILED CONTRACTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON MANAGEMENT,
INVESTIGATIONS, AND OVERSIGHT
of the
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 17, 2008
__________
Serial No. 110-140
__________
Printed for the use of the Committee on Homeland Security
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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__________
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COMMITTEE ON HOMELAND SECURITY
Bennie G. Thompson, Mississippi, Chairman
Loretta Sanchez, California Peter T. King, New York
Edward J. Markey, Massachusetts Lamar Smith, Texas
Norman D. Dicks, Washington Christopher Shays, Connecticut
Jane Harman, California Mark E. Souder, Indiana
Peter A. DeFazio, Oregon Tom Davis, Virginia
Nita M. Lowey, New York Daniel E. Lungren, California
Eleanor Holmes Norton, District of Mike Rogers, Alabama
Columbia David G. Reichert, Washington
Zoe Lofgren, California Michael T. McCaul, Texas
Sheila Jackson Lee, Texas Charles W. Dent, Pennsylvania
Donna M. Christensen, U.S. Virgin Ginny Brown-Waite, Florida
Islands Gus M. Bilirakis, Florida
Bob Etheridge, North Carolina David Davis, Tennessee
James R. Langevin, Rhode Island Paul C. Broun, Georgia
Henry Cuellar, Texas Candice S. Miller, Michigan
Christopher P. Carney, Pennsylvania
Yvette D. Clarke, New York
Al Green, Texas
Ed Perlmutter, Colorado
Bill Pascrell, Jr., New Jersey
I. Lanier Lavant, Staff Director
Rosaline Cohen, Chief Counsel
Michael Twinchek, Chief Clerk
Robert O'Connor, Minority Staff Director
______
SUBCOMMITTEE ON MANAGEMENT, INVESTIGATIONS, AND OVERSIGHT
Christopher P. Carney, Pennsylvania, Chairman
Peter A. DeFazio, Oregon Mike Rogers, Alabama
Yvette D. Clarke, New York Michael T. McCaul, Texas
Ed Perlmutter, Colorado Candice S. Miller, Michigan
Bill Pascrell, Jr., New Jersey Peter T. King, New York (Ex
Bennie G. Thompson, Mississippi (Ex Officio)
Officio)
Tamla Scott, Director & Counsel
Daniel Wilkins, Clerk
Michael Russell, Senior Counsel
(II)
C O N T E N T S
----------
Page
STATEMENTS
The Honorable Christopher P. Carney, a Representative in Congress
From the State of Pennsylvania, and Chairman, Subcommittee on
Management, Investigations, and Oversight...................... 1
The Honorable Mike Rogers, a Representative in Congress From the
State of Alabama, and Ranking Member, Subcommittee on
Management, Investigations, and Oversight...................... 2
The Honorable Bennie G. Thompson, a Representative in Congress
From the State of Mississippi, and Chairman, Committee on
Homeland Security.............................................. 3
WITNESSES
Panel I
Mr. Richard K. Gunderson, Deputy Chief Procurement Officer,
Department of Homeland Security:
Oral Statement................................................. 5
Prepared Statement............................................. 7
Mr. James L. Taylor, Deputy Inspector General, Department of
Homeland Security:
Oral Statement................................................. 11
Prepared Statement............................................. 13
Mr. John P. Hutton, Director, Acquisition and Sourcing
Management, Government Accountability Office:
Oral Statement................................................. 18
Prepared Statement............................................. 20
Panel II
Ms. Marcia G. Madsen, Chair, Acquisition Advisory Panel:
Oral Statement................................................. 40
Prepared Statement............................................. 42
Mr. Scott Amey, General Counsel, Project On Government Oversight:
Oral Statement................................................. 50
Prepared Statement............................................. 51
Mr. Marc A. Pearl, President and Chief Executive Officer,
Homeland Security and Defense Business Council:
Oral Statement................................................. 58
Prepared Statement............................................. 60
Appendix
Questions From Ranking Member Mike Rogers........................ 77
WASTE, ABUSE AND MISMANAGEMENT:
CALCULATING THE COST OF DHS FAILED CONTRACTS
----------
Wednesday, September 17, 2008
U.S. House of Representatives,
Committee on Homeland Security,
Subcommittee on Management, Investigations, and Oversight,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
Room 311, Cannon House Office Building, Hon. Christopher P.
Carney [Chairman of the subcommittee] presiding.
Present: Representatives Carney, Thompson, Pascrell, and
Rogers.
Mr. Carney. The subcommittee will come to order.
The subcommittee is meeting today to receive testimony on
``Waste, Abuse and Mismanagement: Calculating the Cost of DHS
Failed Contracts.''
Today's hearing is the final Management, Investigations and
Oversight Subcommittee hearing of the 110th Congress. By my
count, this is the 19th hearing this subcommittee has held
since February 2007. That doesn't even take into consideration
the full committee hearings that built upon our work in this
subcommittee and our work with other subcommittees.
Looking back at what we have investigated and discussed in
this venue over the last year and a half leads back to what is
really at the root of today's hearing: a broken acquisition
process at the Department of Homeland Security.
We have heard countless times how difficult it is for
corporate mergers between two businesses to be successful; how,
on average, it takes 7 years; how much more difficult it is
when 22 agencies are combined to form a new Federal
bureaucracy, et cetera. This is nothing new. When
Representative Rogers chaired this subcommittee, I am sure he
heard the same thing. What happened to lessons learned?
I think what is most frustrating for me during this
Congress is hearing from DHS about taxpayers' dollars being
wasted. As the only contact that many people in my district
have with the Federal Government, how do I explain to them why
DHS has spent tens of millions on a virtual fence along the
southern border that hasn't given us any more protection? They
ask how the Coast Guard could have so seriously botched
upgrades to some ships that they now are floating scrap in the
Baltimore Harbor instead of patrolling our coasts. Why did FEMA
purchase so many trailers with such high levels of formaldehyde
and then continue to place people in them even after it became
aware of the dangers contained in the trailers?
I was shocked to hear the Department was considering
contracting with DynCorp to supplement the Border Patrol when
DynCorp was simultaneously recruiting Border Patrol agents to
become private security contractors in Iraq. Sure, the
procurement process is a small piece of the acquisition
process, but we have seen billions of taxpayers' dollars wasted
in failed procurement. That is simply unacceptable.
Our country's safety and preparedness is one of my top
priorities, but DHS shouldn't have a blank check to buy
anything it wants, nor should it be immune from any of the laws
requiring it to conduct its business with due diligence. Tens
of millions have been paid out to contractors for what amounts
to nothing more than bad ideas and empty promises. We must look
no further than Secure Flight or Emerger II for glaring
examples. It all comes down to the fact that the acquisitions
work force at DHS was overlooked and underdeveloped from the
start, despite warnings from Congress, GAO and the best think
tanks this country has to offer.
The Department has gone through various senior executives
since its inception, but three chief procurement officers in
that amount of time really hasn't done much to solidify the
acquisition shop. Independent Government investigators have
told the tale, as have many testimonies before Congress, that
there simply aren't enough personnel at the DHS acquisition
shop itself.
This isn't limited to DHS. There has been no shortage of
criticism recently regarding the Federal Government's reliance
upon lead systems integrators. We saw this with Deepwater. In
DHS's case, if they are serious about righting the ship, they
need to take some recently retired, very skilled Federal
acquisition and procurement staff and take a tiny fraction of
the taxpayers' dollars that have been wasted on DHS efforts to
bring these people back to train the much-needed next
generation of Federal acquisition and procurement officers.
I am sure I am not alone in my frustration when it comes to
Government waste. Unfortunately, no matter how many times DHS
is told what they are doing wrong and how to improve what they
do, nothing changes. Hopefully shining more light on the
situation today at a point when DHS leadership can incorporate
proposals for acquisition and procurement improvement in
administration transition policies will make a difference.
The Chair now recognizes the Ranking Member of the
subcommittee, the gentleman from Alabama, for an opening
statement.
Mr. Rogers. Thank you, Mr. Chairman.
I, too, would like to thank the witnesses for taking the
time out of their schedule to be with us today as we talk about
this very important area of procurement acquisition
contracting.
It is the first hearing I can remember since being on this
committee that I was able to read in The Washington Post what
took place in the hearing before we even had it, so you never
know what is going to happen.
When I was Chairman of this subcommittee in the 109th
Congress, we conducted rigorous oversight of the Department's
contracting and held numerous hearings in this area, so it is
not a new phenomenon that we are experiencing here.
In addition, this committee reported H.R. 5814, the
Department of Homeland Security Authorization Act for Fiscal
Year 2007, which included provisions on procurement reform,
procurement training and stronger background reviews of
contractors. An effective authorization bill covers these
issues and is an integral part of this committee's work.
To assist DHS in strengthening its procurement function, it
is essential that this committee develop and pass an annual DHS
authorization bill before Congress acts on the Homeland
Security appropriations bill. However, since this does not
appear possible at this late stage, Congress should at least
move the annual appropriations bill. If an appropriations bill
is not passed and DHS is forced to operate under a continuing
resolution, the folks at the Department may not have all the
resources they need to fulfill this critical mission.
The Department has made significant improvements in
acquisition management over the last several years. This
subcommittee's oversight has helped the Department to craft
long-term strategies to address its procurement problems. As we
have seen, positive and constructive oversight can help the
Department address its weaknesses. While more work clearly
remains to be done, the Department has come a long way.
I look forward to hearing from our witnesses today.
Mr. Chairman, I yield back.
Mr. Carney. Thank you.
The Chair now recognizes the Chairman of the full
committee, the gentleman from Mississippi, Mr. Thompson, for an
opening statement.
Mr. Thompson. Thank you very much.
I would first like to thank Chairman Carney for holding
this important hearing on an issue of vital concern.
I am holding in my hand a table, and I will share it with
the other Members, a list of some--and I emphasize ``some''--of
the Department's programs that have been plagued with a litany
of contract problems. Some of these programs were canceled due
to contract failures, while others produced some results but
never came close to fulfilling their proposed original
intention. These planned contracts cost substantially more than
their original budgets. DHS spent almost $15 billion--not
million, billions with a ``B,'' as in ``boy''--of taxpayers'
funds on these failed and planned programs.
This hearing is one of the last hearings we will have
before the 110th Congress adjourns, and unfortunately I must
end this Congress with the same message to DHS that I gave at
the beginning of this Congress. At the beginning of the 110th,
I set forth an 8-point platform for the Committee on Homeland
Security.
The first plank in this platform set forth the need to
improve the functionality, governance and accountability of the
Department of Homeland Security. The heart of functionality,
governance and accountability is simple: create an
administrative and management system that is transparent and
accountable. Agency officials must know where and how the money
is being spent and must be able to ensure that a program
receives internal oversight prior to its rollout and after its
completion.
DHS still has not created that kind of system. Instead, DHS
leadership has permitted a system of waste, abuse,
mismanagement, vague contractual terms, overspending, bonuses
for bad performance, contractors being hired to oversee
contractors in the same missteps over and over again. A casual
look at some of the Department's efforts lead to disturbing
findings: $5 million a mile for a fence; TWIC cards that can't
be read; no readers for the TWIC cards that we can read. Now we
find that TWIC cards may or may not lose their identity if they
are attached to other credit cards in one's wallet. So we have
some problems. Ships that don't fit into ports; formaldehyde-
laced trailers that make the occupants sick; an information-
sharing program that law enforcement personnel do not want to
use.
Taxpayers have had enough. Americans deserve a country that
is safe, secure, and ready to respond in the event of a natural
or manmade disaster. Americans expect that those given the
responsibility of managing our scarce homeland security
resources will do so responsibly, prudently, and with an eye
toward avoiding waste.
While the fate of these contracts will be left to the next
President and the next Secretary of Homeland Security, as Chair
of the Committee on Homeland Security my job is to hold the
Department accountable right now.
I have many things to say before, and I will say it again,
Homeland Security's dollars are not to be wasted. They are
dollars that could be used, if not wasted, to secure our
borders like they should, but also to make our airports and
airplanes safe and to help protect against those who wish to do
us harm.
Mr. Chairman, I look forward to the testimony of the
witnesses as well as the follow-up on the questions. Thank you.
Mr. Carney. Thank you, Mr. Chairman.
Other Members of the subcommittee are reminded that, under
committee rules, opening statements may be submitted for the
record.
I would now like to welcome the witnesses.
Our first witness is Mr. Richard K. Gunderson. He is a
deputy chief procurement officer at the Department of Homeland
Security. Mr. Gunderson is a career Federal employee with 20
years of public service in the acquisition career field. He
came to DHS headquarters in April 2008, as the DCPO.
Prior to that, he served as the Transportation Security
Administration's assistant administrator for acquisition and
chief procurement executive from November 2005 to April 2008.
In that capacity, he was responsible for an annual $2 billion
acquisition program in addition to providing acquisition
support to TSA operations across the Nation's airports and
other modes of transportation, as well as one of the largest,
most complex acquisition programs in DHS.
Our second witness, Mr. James L. Taylor, is a deputy
inspector general of the Department of Homeland Security. Mr.
Taylor was selected as deputy inspector general effective
October 16, 2005. He previously served as the deputy chief
financial officer and the director for financial management at
the Department of Commerce.
Prior to his work at Commerce, Mr. Taylor held the position
of deputy chief financial officer at the Federal Emergency
Management Agency, FEMA, where he was directly responsible for
all financial operations, with expenditures of up to $10
billion annually.
Our third witness, Mr. John P. Hutton, currently serves as
the director of acquisition and sourcing management at the U.S.
Government Accountability Office. In this capacity, he provides
direct support to congressional committees and Members on a
range of acquisition and sourcing issues aimed at improving
Federal agencies' ability to buy products and services
effectively and efficiently.
Throughout his GAO career, he has worked on a wide range of
issues. This work led to several dozen reports and testimonies.
Mr. Hutton began his GAO career in 1978. From 1983 to 1987, he
served in GAO's former European office in Frankfurt, Germany,
where he focused largely on defense and foreign affairs issues.
Without objection, the witnesses' full statements will be
inserted into the record.
I now ask each witness to summarize his or her statement
for 5 minutes, beginning with Mr. Gunderson.
STATEMENT OF RICHARD K. GUNDERSON, DEPUTY CHIEF PROCUREMENT
OFFICER, DEPARTMENT OF HOMELAND SECURITY
Mr. Gunderson. Thank you, Chairman Carney, Ranking Member
Rogers, full committee Chairman Thompson and Members of the
subcommittee. Thank you for this opportunity to appear before
you to discuss the Department of Homeland Security acquisition
program.
I am the deputy chief procurement officer for the
Department, with 20 years of public service in the acquisition
career field.
DHS has strengthened many aspects of its acquisition
program over the first 5 years of the Department, and we
continue to seek improvements to meet our mission and achieve
acquisition excellence. In order to appreciate how far we have
come, I would like to describe the growth in breadth of our
organization.
In March 2003, there were approximately 600 contracting
specialists throughout seven contracting activities supporting
the legacy components. Supporting the newly established
headquarters was a single contracting officer detailed to
personally handle and coordinate procurement requests from all
newly established offices within headquarters. Today there are
over 1,000 contracting specialists across the Department.
Within the office of the chief procurement officer, there
are 120 employees. Within the office of procurement operations,
it has grown to a staff of 180. The chief procurement office is
responsible for policy and oversight of the DHS acquisition
program, including grants, competitive sourcing, strategic
sourcing, e-business initiatives, acquisition work force
analysis, cost analysis, and program management.
As the Department has organized and defined its many
missions, the acquisition of products and services has been
essential to successfully securing our Nation. The requirements
have been complex and diverse, including core infrastructure
needs, security equipment, aircraft and ships, facilities, and
emerging technologies. The threat is neither constant nor
consistent, and, as a result, the acquisition program must be
able to adapt and identify both near- and long-term solutions.
In order to meet this mission, we continue to strengthen
and institutionalize an acquisition framework that will provide
a disciplined process that integrates planning, requirements,
budgeting and acquisition. Earlier this year, the chief
procurement officer, Tom Essig, identified his top three
priorities for fiscal year 2008: quality contracting, quality
program management, and quality people. While we have made
significant progress on these three priorities, more remains to
be done. For that reason, the CPO will retain the same
priorities as the Department advances into fiscal year 2009.
Priority No. 1: Quality contracting. We are focused on
making good business decisions that enable us to meet mission
and be good stewards of the taxpayer dollar. Our efforts in
this area have not gone unnoticed. The Small Business
Administration has notified DHS that we will receive our second
consecutive ``green'' on the small-business procurement
scorecard, recognizing the DHS acquisition community for its
efforts in achieving various small-business and socioeconomic
contracting goals.
Also this year, the Office of Federal Procurement Policy
recognized our competitive and acquisition excellence award
program, which recognizes efforts in promoting and achieving
competition and realizing cost savings and cost avoidance.
Priority No. 2: Quality program management. In order to
deliver mission capabilities, we are focused on strengthening
other acquisition disciplines, including program management,
cost analysis, logistics, systems engineering, and testing.
Additionally, over the past 6 months, our Acquisition Program
Management Division has worked with representatives from across
the Department to develop and implement a revised management
directive which will establish the acquisition management
framework which will govern our investment programs.
Priority No. 3: Quality people. One of the most hard-to-
fill occupational series within the Federal Government is the
1102 contracting series. Last week, there were more than 1,400
vacancy announcements for the 1102 job series across the
Federal Government. At DHS, our targeted efforts include open
and continuous job vacancy announcements at all grade levels,
aggressive use of direct hire authority, expansive use of the
Acquisition Professional Career Program, and the use of re-
employed annuitants.
The same attention is being directed to the retention of
our existing staff. We are committed to providing our employees
with tools, developmental opportunities and workplace
flexibilities inherent to best places to work.
I have been a part of this Department since it was
established, and today I can tell you I have been able to say
each year along the way that we are stronger and doing better
business than before. We have grown in numbers of acquisition
professionals, we have implemented new policies and procedures,
and we have implemented new business strategies that are more
cost-effective and meet our missions.
This is not an overnight process but one that requires a
commitment to achieving excellence. I am proud of how far we
have come and intend on pushing for continued change for the
better.
Thank you for the opportunity to testify before the
subcommittee. I am glad to answer any questions you or the
Members of the subcommittee may have for me.
[The statement of Mr. Gunderson follows:]
Prepared Statement of Richard K. Gunderson
September 17, 2008
Chairman Carney, Ranking Member Rogers, and Members of the
subcommittee, thank you for this opportunity to appear before you to
discuss the Department of Homeland Security (DHS) acquisition program.
I am the Deputy Chief Procurement Officer (DCPO) for the DHS, the co-
lead executive responsible for the management, administration and
oversight of the Department's acquisition programs. In that capacity, I
oversee and support ten procurement offices within DHS. The Office of
the Chief Procurement Officer provides the infrastructure that provides
the acquisition policies, procedures, training and work force
initiatives that enables our acquisition professionals to support
mission accomplishment while also being good stewards of taxpayer
dollars.
I am a career Federal employee, with 20 years of public service in
the acquisition career field. I came to DHS Headquarters in April 2008
as the DCPO. Prior to that, I was the Transportation Security
Administration's (TSA) Assistant Administrator for Acquisition and
Chief Procurement Executive from November 2005 to April 2008,
responsible for an annual $2 billion acquisition program. In this
position, I provided acquisition support to TSA operations across the
Nation's airports and other modes of transportation as well as to one
of the largest and most complex acquisition programs in DHS.
As the Chief Procurement Executive, I provided executive leadership
to TSA's acquisition program, including investment reviews, award and
administration of contracts, financial assistance, interagency
agreements and other transactions. I was also responsible for
development of TSA's contracting work force and acquisition policy. I
was a business advisor to TSA's leadership and instituted program
management as a core competency at TSA. Before joining TSA in December
2002, I was a Contracting Officer for the Department of Defense's Naval
Sea System Command, where I led contracting efforts associated with
numerous major weapon systems.
DHS ACQUISITION PROGRAM OVERVIEW
As the Department has organized and defined its many missions, the
acquisition of products and services has been essential to successfully
securing our Nation. The requirements have been complex and diverse,
including core infrastructure needs, security equipment, aircraft and
ships, facilities, and emerging technologies. The threat is neither
constant nor consistent, and as a result, the acquisition program must
be able to adapt and identify both near- and long-term solutions. Since
it was established, the Office of the Chief Procurement Officer's
mission, in conjunction with the respective contracting offices, has
been to provide the needed products and services to meet the DHS
mission and do so in way that represents sound business and
demonstrates we are good stewards of the taxpayers' dollars. In order
to achieve this mission, we have and will continue to focus on our
people and our processes. We recognize the need to have qualified
professionals who are trained and certified to perform their respective
duties in an increasingly complex and fluid regulatory and policy
environment. We have made significant strides in creating an
acquisition work force program that is focused on recruiting, training,
and retaining a cadres of acquisition professionals in multiple
disciplines. We recognized the need for sound business processes by
publishing the Homeland Security Acquisition Regulation and Guidebook
and have instituted internal controls for our investments through our
Acquisition Oversight Program which has been favorably reviewed by the
Comptroller General at Congressional Direction. In the near future we
will be publishing our Program Review processes to further define
program internal controls just as we have done for the procurement and
contracting portion of Acquisition Management. DHS is continuing to
strengthen its policies and processes to institutionalize an
acquisition framework that will provide a disciplined process that
integrates planning, requirements, budgeting and acquisition.
BUILD-UP AND GROWTH OF THE OFFICE OF THE CHIEF PROCUREMENT OFFICE AND
THE OFFICE OF PROCUREMENT OPERATIONS
In March 2003, there were seven contracting activities supporting
legacy components: TSA, USCG, USSS, CBP, ICE, FLETC and FEMA.
Supporting the newly established Department Headquarters was a single
contracting officer detailed to DHS Headquarters to personally handle
and coordinate procurement requests from all newly established offices
within Headquarters, including the newly formed Science and Technology
Directorate (S&T), the Information Analysis and Infrastructure
Protection (IAIP) Directorate, and the Border and Transportation
Security (BTS) Directorate. The first Chief Procurement Officer, Greg
Rothwell, came on board in the summer of 2003.
In fiscal year 2004, the OCPO began defining the specific functions
of policy and oversight, as well as established the Office of
Procurement Operations (OPO). As the newest DHS contracting activity,
OPO had the responsibility to support the contracting requirements of
the DHS Headquarters and any other organization that did not have its
own contracting activity. OPO reports directly to the CPO while the
other contracting activities report through their respective
component's chain of command while receiving their Procurement and
Contracting authority from the OCPO. In fiscal year 2004, OCPO had only
four employees while the entire Department employed 603 GS-1102
contracting specialists. By the end of fiscal year 2005, OCPO had grown
to 30 staff members performing procurement policy and oversight
functions, to include grants oversight, competitive sourcing oversight,
strategic sourcing and e-business initiatives and had added another
function in support of acquisition work force management. In fiscal
year 2007, OCPO established the Acquisition Oversight Division,
dedicated to assessing the Department's procurements and acquisition
programs. In fiscal year 2008, as the quantity and complexity of
programs supporting DHS missions continued to increase, the need to
evolve and establish additional functions within OCPO became necessary.
OCPO established two new divisions to support critical acquisition
functions, the Acquisition Program Management Directorate (APMD) and
the Cost Analysis Division (CAD). APMD and CAD provide essential
competencies that are core to the infrastructure of the Department's
acquisition program. In addition to policy and oversight of their
respective functional areas, the missions of APMD and CAD include
providing outreach support to the various program offices to ensure
sound program management principles are being applied to the programs.
OCPO recognizes a successful acquisition program is more than
policy and oversight, it requires a talented work force. Therefore,
another priority of our acquisition framework is to improve our ability
to attract and retain needed resources. Currently, there are more than
1,000 contract specialists across the Department and we continue to
recruit candidates at all grade levels. However, one of the most hard-
to-fill occupational series within the Federal Government is the 1102
contracting series. The great demand far exceeds the number of
qualified mid-level and senior level contracting professionals. As this
testimony is being prepared there are 1,432 vacancy announcements for
the 1102 job series across the Federal Government. At DHS, our targeted
efforts include open and continuous job vacancy announcements at all
grade levels, GS-9 through GS-15; aggressive use of the Department's
direct-hire authority for the 1102 contracting series; expansive use of
the OCPO's Acquisition Professional Career Program, and the use of re-
employed annuitants to serve as mentors to our acquisition interns, in
training and in oversight. Many of the individuals we are hiring, from
our new interns to our seasoned professionals, appreciate the
importance of DHS' mission and want to protect our homeland as much as
those individuals with me today.
The same attention given to the recruitment of staff is being
directed to the retention of our existing staff. Our contracting
organizations are committed to providing their employees with the
tools, developmental opportunities, and workplace flexibilities
inherent to ``best places to work.'' For example, the Head of
Contracting Activity (HCA) of OPO instituted a tuition assistance
program, an annual employee satisfaction survey, an exit survey, and
structured rotational/development work assignments. Other initiatives
are being finalized that include expanded alternate work schedule
options and tele-commuting options. Similar programs and initiatives
are being implemented across the Department.
As OCPO has concentrated on our acquisition work force and
processes, the operational contracting activities have been focused on
procuring the goods and services required in support of their programs.
As I mentioned earlier, our acquisition portfolio is diverse, ranging
from small purchases to commercial items to complex, cutting-edge
solutions. In many cases, key mission capabilities cannot be satisfied
by commercial or non-complex procurements. Rather, these capabilities
will come from solutions derived from developmental efforts at the
initial stage of the acquisition lifecycle. In these situations, the
program assesses alternatives and performs demonstrations to determine
if the solution is effective and worthy of continued investment. For
these reasons, OCPO is implementing an acquisition framework that
establishes policies and procedures to enable the Department to better
ensure good investment and business decisions. Over the past 6 months,
the Acquisition and Program Management Division within OCPO has
collaboratively worked with the representatives from across the
Department to develop the revised Acquisition Management framework that
will provide the governance of our investment programs. This effort,
combined with a revised Requirements process, integrated together, will
form the foundation of the investment decision process. Once a
requirement is identified, validated and resourced, the program will be
subject to reviews at critical decision points to ensure continued
investment in the program is in the best interests of the Government.
Earlier this year, the CPO, Tom Essig, identified his top
priorities for fiscal year 2008. While we have made significant
progress on all three priorities, more remains to be done. We are
committed to the Department's acquisition community to be one of that
looks toward achieving excellence in what everything we do. The CPO
will retain the following priorities as the Department advances into
fiscal year 2009.
PRIORITY NO. 1: QUALITY CONTRACTING
We need to make business decisions that enable us to accomplish our
mission, while also being good stewards of taxpayer dollars. Within the
OCPO, we are developing and implementing a policy and oversight
framework that will facilitate the Department's ability to achieve this
objective.
We recognize that competition is good for both Government and
industry. For this reason OCPO established in June 2007, the DHS
Competition and Acquisition Excellence Award Program as an on-going
program whereby Component HCAs are invited to provide the DHS
Competition Advocate with nominations citing team or individual
accomplishments in promoting and achieving competition and/or use of
innovative and best practices. Competition advocacy and the use of
innovative and best acquisition practices are a means of strengthening
acquisition management. It provides greater value products and
services, reduces risk, and is an underlying objective of the
Secretary's goal to strengthen and unify DHS operations and management.
This program was established as a means of motivating and recognizing
individual and team accomplishments and sharing best practices in
promoting and achieving competition, realizing cost savings/cost
avoidance, and/or implementing improved acquisition practices. There
were 13 efforts recognized for their fiscal year 2007 accomplishments.
It is estimated that the Department's cost savings/avoidance was more
than $5.2 million. These achievements in promoting competition have
long-term effects that result in improvements to the Department's
investment review processes and the quality of our program/project
management. In a July 18, 2008 memorandum to Agency and Department
Chief Acquisition Officers, the Office of Federal Procurement Policy
cited the DHS Competition and Acquisition Excellence Awards Program as
an example for agencies considering establishment of recognition
programs.
Another important aspect of making good business decisions involves
the role of the Office of Small and Disadvantaged Business Utilization
(OSDBU) to assist and counsel all types of small businesses (including
veteran-owned small business, service-disabled veteran-owned small
business, HUBZone small business, small disadvantaged business, and
women-owned small business concerns) on procedures for contracting with
the Department of Homeland Security. Our goal is to help small
businesses by fostering an environment where these firms can compete
for a fair share of DHS contracts and subcontracts. Through our
efforts, we are able to support the OCPO by engaging the cooperation of
all members of the DHS team (senior management, contracting officers,
program managers, and small business specialists) to work together. The
OSDBU works closely with the DHS procurement offices to identify
significant procurement opportunities for small business participation;
participates in an extensive outreach program; maintains a robust small
business procurement assistance web site at www.dhs.gov/
openforbusiness; and works closely with SBA senior management to ensure
all aspects of small business issues are reviewed and addressed to the
benefit of all parties. In fact, the small business program managers
and specialists are very active in communicating with industry, hosting
or participating in more than 75 vendor sessions in fiscal year 2008
alone.
I am very proud to report that the Small Business Administration
(SBA) has just notified DHS that it will receive its second consecutive
``green'' on the Small Business Procurement Scorecard; recognizing the
efforts of not only the OSDBUs, but the acquisition community for its
efforts in achieving various small business and socio-economic goals.
PRIORITY NO. 2: QUALITY PROGRAM MANAGEMENT
In order to deliver the capabilities to meet DHS' mission on
schedule and within budget, we are working to strengthen program
management, including related functions such as cost analysis,
logistics, systems engineering, and test and evaluation. Our goal is to
make certain we have the policies, processes, and skilled people in
place to effectively manage our programs and ensure the successful
achievement of our mission objectives. During the past year, we
established a core group within OCPO and partnered with the Defense
Acquisition University and the Homeland Security Institute to ensure we
have the skills and experience necessary to assess the status of DHS'
acquisition programs and put policies and procedures in place to
improve the management of our acquisition programs. We are also working
to ensure that our program management teams are appropriately staffed
and trained. The Program Management Council, chaired by APMD and
consisting of acquisition professionals from across DHS, has been
established and meets regularly to discuss policies, procedures, and
current issues affecting Government acquisition.
As previously described, the Acquisition Program Management
Division (APMD) develops, implements, and manages Departmental
acquisition policies and processes, in parallel with providing in-
process support to the DHS components in their acquisition efforts.
This division developed and implemented multiple initiatives that
significantly improve DHS acquisition and program management policy and
processes. In a short time, this division has made great strides making
significant operational improvements or notable innovation in support
of the Department's missions. This division has completed a complete
revamping of the DHS acquisition process. They have revised a
management directive to establish a new process to be followed by all
significant acquisition programs. This effort significantly improves
the Department's ability to provide effective management oversight at
key decision points throughout a program's lifecycle.
At the request of DHS Leadership, the APMD developed and executed
``QuickLooks'' during the period August-December 2007. These QuickLooks
took a snapshot of selected Level 1 DHS programs and examined the
Departmental acquisition polices and procedures used during their
existing lifecycle. This was the first ``cross-cutting'' look taken at
a top level of the DHS Acquisition portfolio. The findings provided the
programs and components with an outside, expert look at the state of
execution of their programs and helped to identify needed changes in
the acquisition oversight management process. This division has jump-
started the Investment Review Boards (IRB) by introducing a more
streamlined process of operation. As a result, more focused and timely
IRBs are held in either physical or virtual venues at the Under
Secretary for Management or Deputy Secretary level as appropriate.
APMD also has developed a clear and practical guide for creating
acquisition program baselines (APB) that provide meaningful content and
strong programmatic documentation. This organization has provided
expertise to a number of significant programs to strengthen their
APB's. Last, but not least, a new Periodic Reporting System (nPRS) has
been selected and is currently in a pilot phase. This is a web-hosted
reporting system that allows program managers and their leadership
quick access to meaningful information on a program's metrics,
condition, and current issues. This system is a collaborative effort
between the Chief Information Officer and the CPO leadership.
The Acquisition Oversight Division has the responsibility for
ensuring the integrity of DHS's acquisition process through the
oversight of all acquisitions that support DHS, including financial
assistance programs (grants), strategic sourcing programs, and
competitive sourcing programs. A key part of carrying out this
responsibility is conducting effective oversight reviews to verify the
integrity of DHS procurement practices. In early 2006, my office set a
goal of completing baseline procurement management reviews for all nine
components by the end of fiscal year 2008. In July 2008, the
acquisition oversight division had completed the field work for all
nine components, had issued final reports for six of those components,
and was on schedule to issue the final reports for the remaining three
components by the end of fiscal year 2008. These baseline reviews will
serve as the foundation for future oversight reviews by providing: (a)
A listing of best practices for distribution/consideration by the
components; (b) identifying systemic issues, recommendations, and
action plans across components; and, (c) a basis for conducting
component specific risk assessments and tailoring future review
programs to focus on key issues identified in past reviews (while
reducing coverage in areas where issues have not been found in the
past). The accomplishment of these baseline reviews provides the
oversight division with a strong underpinning of lessons learned that
can be built on as the oversight function continues to assure integrity
in DHS procurement.
PRIORITY NO. 3: QUALITY PEOPLE
A key enabler of our ability to make good business deals is a
highly skilled and motivated acquisition work force. In fiscal year
2008, we are focusing on four acquisition work force initiatives:
Establishment of an acquisition intern program; identification of
certification and training requirements for all acquisition functional
areas; a centralized acquisition training fund; and centralized
recruitment and hiring of acquisition personnel. I greatly appreciate
the funding we received in fiscal year 2008 in support of these
initiatives.
The Acquisition Professional Career Program (APCP) serves as the
pipeline for providing talented, trained acquisition personnel
procuring goods and services in support of securing the homeland. The
APCP Component working group has made significant progress in
recruiting and determining needs across Component organizations. Over
40 percent of the DHS procurement work force is approaching retirement
eligibility. In fact, more than half of those are currently eligible
for retirement (over age 55 with 30 years of service). Current and
continuing level of procurement professional employment is being
sustained by an aging work force continuing to work even when eligible
for retirement. The working group's efforts have resulted in the
successful placement of 48 highly qualified procurement interns across
the Department with plans for an additional 150 interns through fiscal
year 2010. Once a participant graduates from the 3-year program, DHS
will realize immediate results in its documented acquisition staffing
shortfalls.
The success of this effort will position the Department to resolve
potential critical procurement skill gaps. DHS hiring and attrition
rates are in line with other non-DoD agencies, meaning we are competing
with other agencies for scarce resources. Preliminary indications from
our APCP indicates a quality work force can be grown and maintained as
the program matures and expands, and this will increase our ability to
better compete for the journeyman-level resources needed to ensure
quality contracting and quality acquisition. The result will be a
highly skilled work force effectively and efficiently executing the DHS
acquisition mission. The working group's success in seamlessly
absorbing 50 interns has further led to the expansion of the program
beyond procurement and into other acquisition series. This is a key
accomplishment. The tremendous growth of Federal and DHS acquisition-
related actions combined with a stagnant number of Contracting
Specialists would otherwise bring the availability and viability of the
DHS acquisition work force in question.
While we have strengthened many aspects of our acquisition program
over the first 5 years of the Department, we will continue to seek
improvements in our processes and provide our acquisition professionals
the tools they need to both meet our mission and achieve acquisition
excellence.
Thank you, Mr. Chairman for your interest in and continued support
of the DHS Acquisition Program.
Thank you for the opportunity to testify before the subcommittee
about the DHS acquisition program. I am glad to answer any questions
you or the Members of the subcommittee may have for me.
Mr. Carney. Thank you for your testimony, Mr. Gunderson.
I now recognize Mr. Taylor to summarize his statement for 5
minutes.
STATEMENT OF JAMES L. TAYLOR, DEPUTY INSPECTOR GENERAL,
DEPARTMENT OF HOMELAND SECURITY
Mr. Taylor. Good afternoon, Mr. Chairman, Mr. Rogers,
Chairman Thompson and Members of the subcommittee. I am Jim
Taylor, deputy inspector general for the Department of Homeland
Security, and I appreciate the opportunity to come before you
today to talk about the issues of acquisition management and
challenges the Department faces.
Once, when asked about an opponent's strategy in the ring,
Mike Tyson replied, ``Everyone has a game plan until you are
hit in the mouth.'' Even in the best of circumstances, the pace
of change at DHS would be that punch in the mouth that would
test any game plan. However, in our work regarding DHS's
contracting practices, common themes and risks have emerged,
primarily the lack of sound game plans, the dominant influence
of expediency, poorly defined requirements, and inadequate
oversight that contributed to the ineffective or inefficient
result and increased cost.
DHS has not consistently balanced the urgency of meeting
mission needs with sound business practices, leaving DHS and
the American taxpayer vulnerable to spending millions of
dollars in unproductive homeland security investments. DHS
acquisition practices must be stringent enough to meet sound
business requirement, yet flexible enough to meet current
needs.
The Department continues to face challenges associated with
implementing an acquisition function it has not fully
integrated. Each component had shared responsibility for the
acquisition functions with the chief procurement officer.
Without the appropriate policies in place, this structure can
create ambiguity about who is accountable for acquisition
decisions. In addition, the Department does not possess an
accurate view of the activities of components. In a recent
report, we found that as a result of separate procurement and
management systems at the Department at component levels, DHS
lacks insight into the status of procurement activities or even
the qualifications of the contracting staff responsible for the
success of these projects.
The lack of adequate oversight has not been found solely at
the Department level. DHS's components have suffered from the
desire for expediency over sound business practices. We have
reported on TSA's lack of oversight of its billion-dollar
contract to train airport screeners and the U.S. Coast Guard's
inability to manage its $24 billion Deepwater contract, both of
which were initiated prior to the creation of DHS, which
followed the same theme of a sense of urgency and lack of
oversight capability.
In 2006, we alerted the Department of significant oversight
weaknesses in the SBInet program. Last week, we released a
report on FEMA's management of $3.2 billion in noncompetitive
contracts to provide comprehensive project management services
for temporary housing units following Hurricane Katrina. We
determined that the combination of deficiencies in acquisition
planning and contract oversight led to waste of Government
funds and questioned costs of $46 million.
We observed a correlation between deficient procurement
practices and contract management procedures and uncontrolled
growth in the amount of funds obligated and expended under the
contracts. Both our office and GAO have recommended that DHS
provide the Office of the Chief Procurement Officer sufficient
resources and authority to enable effective Department-wide
oversight of acquisition policies and procedures. The OIG has
also made specific recommendations to components regarding the
staffing and training of their procurement functions.
However, we are seeing areas where some progress is being
made. DHS's executive leadership has enhanced the role of the
Procurement Review Board for major activities. The Department
and components have significantly increased the number of
acquisition staff positions, and the Department is establishing
an acquisition internship program, among other initiatives.
In addition, the Coast Guard has restructured its
procurement oversight function and completed the integration of
three separate accounting systems into a single acquisition
construction and improvement data set. FEMA has more than
tripled the number of its acquisition staff.
It is difficult to overstate the complexity and importance
of the task assigned to the Department of Homeland Security,
and little disagreement exists about the need for our Nation to
protect itself immediately against the range of threats, both
natural and manmade, that we face. At the same time, the
urgency and complexity of the Department's mission create an
environment in which many programs have acquisitions with a
high risk of cost overruns, mismanagement or failure. A
balanced approach between urgency and good business practices
is most likely to result in the right products and services at
the right times for the right prices.
The need to secure the homeland and strong internal
controls and accountability need not be mutually exclusive. For
our part, Mr. Chairman, our annual report on management
challenges has identified acquisition as a key area of concern.
Last year, we also initiated a series of scorecards identifying
the Department's progress on those management challenges. The
acquisition scorecard was the very first one we released. It is
the Inspector General's intention to continually and annually
update these scorecards and keep track of the Department's
progress.
Mr. Chairman, this concludes my prepared remarks, and I
would be pleased to answer any questions you may have.
[The statement of Mr. Taylor follows:]
Prepared Statement of James L. Taylor
September 17, 2008
Good afternoon, Mr. Chairman and Members of the subcommittee. I am
James L. Taylor, Deputy Inspector General for the Department of
Homeland Security. Thank you for the opportunity to discuss the
acquisition management challenges facing DHS.
The Department of Homeland Security is charged with extremely
challenging and critical missions; be it reducing illegal immigration,
preventing dangerous individuals and materials from entering our
country, protecting our waterways, ensuring safe travel by air and
rail, or working in collaboration with States and localities to prepare
for, and respond to natural disasters, to name just a few. Contracting
for goods and services is absolutely critical to achieving these
missions and consumes nearly 40 percent of the Department's annual
budget of $47 billion. As a result, effective acquisition management is
fundamental to DHS' ability to accomplish its mission.
Acquisition management is not just awarding a contract, but an
entire process that begins with identifying a mission need and
developing a strategy to fulfill that need through a thoughtful,
balanced approach that considers cost, schedule, and performance. A
successful acquisition process requires an effective acquisition
management infrastructure. This is especially true when complex and
large dollar procurements are involved.
Today, I would like to highlight acquisition management challenges
facing the Department in the following areas:
Organizational alignment and leadership;
Policies and processes;
Financial accountability;
Acquisition work force;
Knowledge management and information systems; and
Balancing urgency and good business practices.
These interrelated elements are essential to an efficient,
effective, and accountable acquisition process.
ORGANIZATIONAL ALIGNMENT AND LEADERSHIP
DHS was created from components of 22 agencies of the Federal
Government. In their transition into DHS, seven agencies retained their
procurement functions, including U.S. Coast Guard (USCG), Federal
Emergency Management Agency (FEMA), and Transportation Security
Administration (TSA). The seven procurement offices, called Heads of
Contracting Activities, retained the expertise and capability they had
before creation of DHS, with staff size that ranged from 21 to 346
procurement personnel. To manage Department-wide procurements and
provide procurement services for the remaining components, DHS created
an eighth office, the Office of Procurement Operations.
DHS also established a Chief Procurement Officer reporting directly
to the Under Secretary for Management. Each component head shares
responsibility for the acquisition function with the DHS Chief
Procurement Officer. As a result of this dual accountability, the Chief
Procurement Officer has used collaboration and cooperation with the
components as the primary means of managing DHS-wide acquisition
oversight.
The Department continues to face challenges associated with
implementing an acquisition function that is not fully integrated. The
structure of DHS' acquisition function creates ambiguity about who is
accountable for acquisition decisions. Within FEMA, for example, we
found that the agency's acquisition function is viewed more as a
support function than as a partner, and it is not aligned
organizationally to ensure efficiency and accountability.
DHS' executive leadership has made modest progress in ensuring the
acquisition program achieves the organizational alignment needed to
perform its functions. One area of improvement is the increased
communication by acquisition leadership to inform staff about the role
and importance of their mission to the Department. The atmosphere for
collaboration between DHS and its component agencies on acquisition
matters has also improved.
POLICIES AND PROCESSES
DHS has made modest progress in developing policies and processes
to ensure that components comply with regulations, policies, and
procedures to achieve Department-wide goals. DHS has developed and
begun to implement an acquisition oversight plan that incorporates
policy, internal controls, and other elements of an effective
acquisition function. While it is too early to assess the acquisition
oversight plan's overall effectiveness, the initial implementation has
helped the components prioritize actions to address identified
weaknesses.
An effective acquisition function includes processes and procedures
that ensure contracts are written with specific measurable criteria
against which the contractor's performance may be evaluated. DHS
components have struggled to implement this important practice, even
before DHS stood up. For example, in August 2002 TSA awarded a $1
billion performance-based contract for information technology managed
services to Unisys Corporation, using a broad statement of objectives
to describe requirements rather than a specific statement of
requirements. At the time of our review,\1\ TSA had expended 83 percent
of the contract ceiling in less than half of the contract period and
had not received many essential deliverables that were critical to
airport security and communications, such as high-speed operational
connectivity. Many airports were operating with archaic telephone
systems, dial-up internet, ineffective e-mail connectivity, and land
mobile radios that were not interoperable with other law enforcement
agencies and did not have reception throughout the airport.
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\1\ Transportation Security Administration's Information Technology
Managed Services Contract, OIG-06-23, February 2006.
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Also on this contract, TSA used service requests, which sometimes
lacked statements of work with delivery due dates and acceptance
criteria. As a result, TSA had no assurance that costs were fair and
reasonable; the contractor was sometimes allowed to perform
unauthorized contract work; and TSA did not effectively manage its
project priorities.
FINANCIAL ACCOUNTABILITY
Financial accountability means having sound financial systems to
provide credible, reliable, and accurate information that can: (1)
Ensure that the agency meets its financial obligations; (2) enhance
strategic acquisition decisions; and (3) enable effective evaluation
and assessment of acquisition activities. DHS has made limited progress
in ensuring financial oversight and accountability within the
acquisition function. The acquisition and finance offices have not
successfully partnered on acquisition planning and strategic
decisionmaking. DHS has numerous and persistent issues with inadequate
internal controls and data verification. Improper payments have been
made, and there are few checks on data once it is recorded in the
system. This problem is exacerbated by the use of multiple,
nonintegrated information technology systems across the Department.
Without a reliable data system, it has been very difficult for the
financial office to make an impact on the broader acquisition process.
ACQUISITION WORKFORCE
Successful acquisition efforts depend on agency and management
valuing and investing in the acquisition work force. The capabilities
of DHS' acquisition work force will determine, to a great extent,
whether major acquisitions fulfill DHS' urgent and complex mission
needs. Contracting officers, program managers, and Contracting Officer
Technical Representatives (COTRs) make critical decisions on a daily
basis that increase or decrease an acquisition's likelihood of success.
It is critical that DHS devote adequate resources to ensure that it has
the right staff, in the right number, with the right skills, in the
right places, to accomplish its mission effectively.
Both our office and the Government Accountability Office (GAO) have
reported that the Office of the Chief Procurement Officer needs more
staff and authority to carry out its oversight responsibilities. GAO
recommended that DHS provide the Office of the Chief Procurement
Officer sufficient resources and enforcement authority to enable
effective, Department-wide oversight of acquisition policies and
procedures. We made a similar recommendation.
Our recent audit of DHS' acquisition work force,\2\ confirmed that
DHS cannot provide reasonable assurance that qualified acquisition
personnel are managing acquisitions. Federal policy requires each
agency to collect, maintain, and utilize information to ensure the
effective management of the acquisition work force. However, neither
DHS, USCG, TSA, nor Customs and Border Protection (CBP) have complete,
reliable information and supporting documentation about their
acquisition personnel or their assignments. The majority of the
acquisition training and certification files we reviewed were
incomplete and did not have supporting training or certification
documentation. Furthermore, major differences existed between the DHS
Acquisition Workforce Development Office database and acquisition work
force databases maintained by the components.
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\2\ Acquisition Workforce Training and Qualifications, OIG-08-56,
May 2008.
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This audit also found that DHS had problems with policies and
procedures associated with the acquisition work force. Management
directives for the Federal acquisition certification programs related
to contracting officers and program and project managers were not
revised timely to reflect current Federal requirements. Additionally,
DHS has not established a policy on the development, selection,
assignment, and management of program managers, and certification
levels for program and project managers were inconsistent among various
management directives.
To its credit, DHS has made some progress in building and
maintaining a skilled acquisition work force. Personnel budget
increases have allowed the Department to fill many acquisition staff
positions. GAO reported in April 2008 that approximately 61 percent of
the minimum required staff are in place. However, this constitutes only
38 percent of the optimal level of contract specialists. Further,
Office of Personnel Management data indicates that more than 40 percent
of DHS' contracting officers will be eligible to retire within the next
5 years. Competition with other departments for acquisition personnel
is intense. To mitigate these circumstances, DHS plans to implement an
acquisition internship program that will bring in junior staff.
Additionally, the Office of the Chief Procurement Office created a
training program to increase the pool of certified program managers,
and has also undertaken an outreach program to involve DHS component
staff to assist in acquisition oversight.
Components within the Department such as USCG and CBP's Secure
Border Initiative have initiatives to develop and retain a work force
capable of managing complex acquisition programs, but they are still
relying on support contractors to fill key positions. Until a fully
trained acquisition work force is developed, it will be difficult to
achieve further progress needed for an efficient, effective, and
accountable acquisition function.
KNOWLEDGE MANAGEMENT AND INFORMATION SYSTEMS
The Department's acquisition-related information systems are
generally not integrated, contain unreliable data, and lack adequate
internal controls. As a result, the acquisition program cannot
effectively provide information to its stakeholders and does not have
the tools necessary for planning or monitoring its transactions. Many
DHS components maintain their legacy contract writing systems and DHS
lacks integration between contract writing and contract management
systems. Although DHS has selected PRISM as its standard contract
writing system, the Department-wide rollout is behind schedule.
Integration and data accuracy problems will continue to exist until all
components migrate to the same contract writing system. DHS also needs
to improve the tracking of its acquisition work force training and
qualifications to ensure work force development and appropriate
assignment to acquisition projects.
DHS has made some progress in improving the integration of its
information systems. For example, the USCG has completed the
integration of three separate accounting systems into a single
Acquisition, Construction, and Improvement data set that is usable by
all Coast Guard acquisition personnel as part of their Blueprint for
Acquisition Reform.
BALANCING URGENCY AND GOOD BUSINESS PRACTICES
Due to our current homeland security vulnerabilities, DHS tends to
focus its acquisition strategies on the urgency of meeting mission
needs, rather than balancing urgency with good business practices.
Excessive attention to urgency without good business practices leaves
DHS and the taxpayers vulnerable to spending millions of dollars on
unproductive homeland security investments. Acquisitions must provide
good value, because funds spent ineffectively are not available for
other, more beneficial uses.
Common themes and risks have emerged from our audits and reviews of
individual DHS contracts, primarily the dominant influence of
expediency, poorly defined requirements, and inadequate oversight that
contributed to ineffective or inefficient results, and increased costs.
DHS has not consistently balanced the urgency of meeting mission needs
with good business practices, leaving DHS and the taxpayers vulnerable
to spending millions of dollars on unproductive homeland security
investments. Expediting program schedules and contract awards limits
time available for adequate procurement planning and development of
technical requirements, acceptance criteria, and performance measures.
This can lead to higher costs, schedule delays, and systems that do not
meet mission objectives.
For example, as a result of the September 11, 2001 terrorist
attacks, TSA faced a formidable challenge to hire a Federalized
screener work force, while concurrently standing up an agency within a
1-year congressional mandate. Although TSA successfully recruited more
than 56,000 airport screeners within the mandated period, success came
at a high cost. The recruitment contract costs grew more than 600
percent over a 10-month period. In response to congressional concerns
over press reports of perceived wasteful Government spending by TSA's
recruitment contractor, NCS Pearson, we audited TSA's management and
oversight of the recruitment program.\3\
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\3\ Review of the Transportation Security Administration's
Management Controls Over the Screener Recruitment Program, OIG-06-18,
December 2005.
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As a relatively new agency, TSA did not have the staff or
infrastructure necessary to adequately plan and manage contracts. As a
result, TSA made critical decisions without the benefit of sound
acquisition planning or adequate cost control, significantly increasing
costs. The establishment of temporary assessment centers, delays, and
revisions in issuance of the airport Federalization schedule and
staffing requirements, and higher than expected applicant rejection
rates significantly impacted the costs to establish and operate
assessment centers. By the contract's end, NCS Pearson had assessed
more than nine times the number of screeners originally estimated in
less than half the time originally allotted. Consequently, the
increased candidate volume necessitated larger and more accessible
assessment centers. All of these factors contributed to the escalation
of contract costs from the original estimate of $104 million to the
settlement amount of $742 million.
Programs developed under a sense of urgency sometimes overlook key
issues during program planning and development of mission requirements.
An over-emphasis on expedient contract awards may also hinder
competition, which frequently results in increased costs or improper
sole-source contracts. For example, CBP did not comply with Federal
regulations when it awarded Chenega Technology Services Corporation a
sole-source contract under an incorrect industry classification
code.\4\ Had CBP used the correct classification, the contractor would
have been ineligible for the sole source award. This action prevented
eligible small businesses from competing for a nearly $475 million
contract and might not have provided the best value for the Government.
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\4\ Customs and Border Protection Award and Oversight of Alaska
Native Corporation Contract for Enforcement Equipment Maintenance and
Field Operations Support, OIG-08-10, October 2007.
---------------------------------------------------------------------------
In another example, in 2005 FEMA issued noncompetitive Individual
Assistance--Technical Assistance Contracts to four large contractors in
2005: Fluor Enterprises, Inc., Shaw Group, CH2M Hill Constructors,
Inc., and Bechtel National, Inc. These contractors were tasked to
provide and coordinate comprehensive project management services. Our
recently released report \5\ focused on the contractor costs incurred
by FEMA for the delivery, installation and maintenance of temporary
housing units for the Hurricane Katrina relief effort on group,
commercial and private sites. We determined that the combination of
deficiencies in acquisition planning and contract oversight led to
waste of Government funds and questioned costs of $45.9 million of the
$3.2 billion contract obligation. We observed a correlation between
deficient procurement practices and contract management procedures, and
uncontrolled growth in the amount of funds obligated and expended under
the contracts. FEMA's ability to properly inspect and accept goods and
services was hampered because of: (1) The number and complexity of
contractor invoices it received; (2) inadequate FEMA staffing; and, (3)
unclear contractor invoices. Of the $45.9 million of questioned costs,
$37.2 million or 81 percent related to inspection and acceptance of
goods and services.
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\5\ Hurricane Katrina Temporary Housing Technical Assistance
Contracts, OIG-08-88, August 2008.
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We recognize that FEMA has already begun the process of improving
its operation and controls. New competitively bid contracts were
awarded in August 2006 and FEMA has been working to improve policy and
procedures. It is well understood that one of FEMA's biggest challenges
during disaster relief efforts is to balance the need to quickly
provide assistance to victims while ensuring accountability to protect
against waste, fraud, and abuse. However, FEMA should ensure contract
terms are clear and enforced.
Although there were established procedures to inspect goods and
services, and perform invoice reviews, amounts invoiced by the
contractors needed to include adequate cost details to allow FEMA to
link invoices to specific contractor activities under the statement of
work. We question how FEMA determined that the amounts invoiced were
allowable and reasonable. Overall, an adequate number of staff should
be employed to: (1) Sufficiently plan acquisitions; (2) monitor
contracts and hold contractors compliant to the terms of the contract;
and (3) inspect and accept services rendered.
Numerous opportunities exist for DHS to make better use of good
business practices, such as well-defined operational requirements and
effective monitoring tools that preserve the Government's ability to
hold poorly performing contractors accountable.
Suspension and debarment are the most serious methods available to
hold Government contractors accountable for failed performance and to
protect the Government's interests in future procurements. To ensure
the Government has the option of using these methods, along with other
tools to hold contractors accountable, the Government must use good
business practices to lay the groundwork from the very beginning of the
acquisition process. That is, contracts must specify precisely expected
outcomes and performance measures, and the Government must properly
oversee contractor performance. Without these basic provisions, the
Government will have no basis to assert that a contractor failed to
perform, and thus, no basis to pursue suspension and debarment to
protect the taxpayers in future procurements.
Little disagreement exists about the need for our Nation to protect
itself immediately against the range of threats, both natural and
manmade, that we face. DHS has been given a difficult and complex task
in addressing these threats. However, we should not allow expediency to
completely and consistently overrule sound business practices. When
that happens, we fail to get the right products and services at the
right times for the right prices.
OUTLOOK AND OIG OVERSIGHT
DHS can protect the public interest in major acquisitions. The
long-run solutions include:
Strong program and procurement offices;
Clearly articulated program goals;
Defined program technical requirements, performance
measures, and acceptance terms;
Well-structured contracts; and
Thorough cost and performance oversight.
In the near term, DHS can mitigate risks and limit Government's
exposure through such actions as the following:
Writing shorter-term contracts with smaller, incremental
tasks;
Using contract vehicles that better share risk between
Government and vendor; and
Ensuring that the Government retains negotiating power with
decision points and options.
For our part, the OIG will continue a vigorous audit and
investigation program to identify DHS acquisition vulnerabilities and
recommend swift, cost-effective improvements. Acquisition management is
and will continue to be a priority for my office. Our plan is to
continue examining such cross-cutting acquisition issues as work force
qualifications, competition, small and disadvantaged business
utilization, and corporate compliance, in addition to individual
projects such as Deepwater and the Secure Border Initiative.
Mr. Chairman, this concludes my prepared statement. I will be
pleased to answer any questions you or the Members may have.
Mr. Carney. Thank you, Mr. Taylor.
I recognize Mr. Hutton for 5 minutes.
STATEMENT OF JOHN P. HUTTON, DIRECTOR, ACQUISITION AND SOURCING
MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Hutton. Chairman Carney, Ranking Member Rogers and
Chairman Thompson of the full committee, I am pleased to be
here today to discuss acquisition management at the Department
of Homeland Security.
As you know, the Nation's homeland security mission calls
for some of the Government's most extensive and complex
acquisitions. Therefore, improving the acquisition management
has been an on-going challenge since DHS was established in
2003.
Based on prior work, we have identified three key
performance areas for acquisition management: Assessing and
organizing acquisition functions to meet the agency needs;
developing clear and transparent policies and processes; and
developing an acquisition work force to execute and oversee
those acquisitions.
While DHS has made some progress by taking steps to
organize and assess the acquisition function, more needs to be
done to create clear and transparent policies and processes for
all acquisitions and to develop and sustain an acquisition work
force.
Today I would like to discuss two key areas needing
improvement: acquisition planning and oversight. In doing so, I
will highlight relevant functions drawn from our recent work on
DHS's reliance on contractors and its use of interagency
contracting and performance-based acquisitions for major
investments.
With regard to acquisition planning, we found that DHS does
not systematically assess the risk in using contractors who are
in a position to influence Government decisions, such as those
that support budget preparations, policy development and the
acquisition function. While contracting for such services can
provide increased flexibility to fulfill immediate needs, it is
critical that the Department understand and mitigate the risks
inherent in those contracts to help ensure the Government does
not lose control over accountability.
Similarly, DHS's decisions to use interagency contracts
were often based on the benefits of speed and convenience, not
on planning and an analysis of alternatives as called for in
the DHS guidance. Comprehensive guidance, training and sound
criteria for selecting interagency contracts are needed to
better ensure the Department gets the best value from those
contracts.
The use of performance-based acquisitions is another area
where improved acquisition planning is needed. Earlier this
year, we reported that four contracts related to eight major
investments reviewed at three DHS components did not have well-
defined requirements or a complete set of measurable
performance standards, or both, at the time of the contract
award or the start of the work. These contracts experienced
cost overruns, schedule delays, or they did not otherwise meet
the performance expectations.
I would now like to highlight our findings related to the
need for improved oversight that help better ensure outcomes in
acquiring services.
Of particular concern is DHS's oversight of contractors who
perform services that closely support inherently governmental
functions. Federal regulations in policy state that when
contracting for these types of services agencies need a
sufficient number of qualified Government personnel to plan and
oversee contractor activities to maintain control and
accountability. However, for the nine cases we reviewed, the
level of oversight provided did not always help ensure
accountability for decisions or the ability to judge whether
contracts were performing as required. We also found that DHS
program officials and contracting officers were not aware of
the Federal requirements for enhanced oversight for these types
of services.
Effective oversight has always been hindered by
insufficient data on DHS acquisitions. Our review of the
Department's use of interagency contracting and performance-
based acquisitions found that DHS does not systematically
collect data on its use of these contracts to assess whether
these methods are being properly managed or to assess costs,
benefits or other outcomes of those acquisition methods.
For example, with respect to interagency contracting, we
found that DHS was not able to provide data on the amounts
spent or the fees paid to other agencies for the use of their
contracting services or vehicles. Without this information, DHS
cannot assess whether the Department could achieve savings
through another type of contracting vehicle.
We similarly found that DHS does not have reliable data on
performance-based acquisitions to facilitate required
reporting, inform their decisions and analyze acquisition
outcomes.
Now on a more positive note, the CPO established the
Department-wide acquisition oversight program in late 2005,
designed to provide insight into component agencies'
acquisitions and to disseminate successful acquisition
management approaches throughout DHS. While this program is an
important step toward improving contract processes and
oversight, our work has found that the CPO continues to face
challenges in maintaining the staffing levels needed to fully
implement the program, and CPO's authority to ensure components
to comply with the procurement oversight plan is unclear.
In closing, improving acquisition outcomes has been an on-
going challenge since DHS was established in 2003. Our prior
work has found that sound acquisition planning, including
clearly defining your requirements, as well as ensuring
adequate oversight, are hallmarks of successful acquisitions.
While DHS has made some progress over the past 5 years, it is
clear that much more needs to be done if it is to ensure that
acquisitions meet the Government's needs.
Mr. Chairman, this concludes my prepared statement, and I
would be happy to respond to any questions that you or other
Members of the subcommittee may have.
[The statement of Mr. Hutton follows:]
Prepared Statement of John P. Hutton
September 17, 2008
GAO HIGHLIGHTS
Highlights of GAO-08-1164T, a testimony before the Subcommittee on
Management, Investigations, and Oversight, Committee on Homeland
Security, House of Representatives.
Why GAO Did This Study
Since it was created in 2003, the Department of Homeland Security
(DHS) has obligated billions of dollars annually to meet its expansive
homeland security mission. The Department's acquisitions support
complex and critical trade, transportation, border security, and
information technology investments. In fiscal year 2007, DHS spent over
$12 billion on procurements to meet this mission including spending for
complex services and major investments.
Prior GAO work has found that while DHS has made some initial
progress in developing its acquisition function since 2003, acquisition
planning and oversight for procurement and major acquisitions need
improvement. This testimony discusses GAO's findings in these areas and
is based on GAO's body of work on acquisition management issues.
What GAO Recommends
While GAO is making no new recommendations in the testimony, GAO
has made numerous recommendations over the past several years to
improve DHS's acquisition management. DHS has generally concurred with
these recommendations, but actions still need to be taken to fully
address them.
DEPARTMENT OF HOMELAND SECURITY.--PROGRESS AND CONTINUING CONCERNS WITH
ACQUISITION MANAGEMENT
What GAO Found
Recognizing the need to improve its acquisition outcomes, DHS has
taken some steps to integrate disparate acquisition processes and
systems that the component organizations brought with them when the
Department was formed. However, we have reported that more needs to be
done to develop clear and transparent policies and processes for all
acquisitions, and to develop an acquisition work force to implement and
monitor acquisitions.
With regard to acquisition planning, DHS did not assess the risk of
hiring contractors to perform management and professional support
services that have the potential to increase the risk that Government
decisions may be influenced by, rather than independent from,
contractor judgments. Planning for services procured through
interagency and performance-based contracting methods was also lacking.
For example, DHS did not always consider alternatives to ensure good
value when selecting among interagency contracts. Shortcomings in DHS's
use of a performance-based approach for complex acquisitions included a
lack of well-defined requirements, a complete set of measurable
performance standards, or both, at the time of contract award or the
start of work. Contracts for several investments we reviewed
experienced cost overruns, schedule delays, or less than expected
performance.
Acquisition oversight also has consistently been identified as
needing improvement. While the Chief Procurement Officer (CPO) has
recently implemented a Department-wide oversight program, evaluations
of the outcomes of acquisition methods and contracted services have not
yet been conducted. Further, the CPO continues to face challenges in
maintaining the staffing levels needed to fully implement the oversight
program, and CPO authority to ensure that components comply with the
procurement oversight plan remains unclear.
Mr. Chairman and Members of the subcommittee: Thank you for
inviting me here today to discuss the Department of Homeland Security's
(DHS) progress and areas for improvement in managing acquisitions. Over
the past several years, as DHS has been developing its acquisition
function, it has spent billions of procurement dollars annually to meet
its expansive homeland security mission. The Department's acquisition
portfolio is broad and complex, supporting critical trade,
transportation, border security, and information technology
investments. In fiscal year 2006, more than 80 percent of DHS's
procurement spending was for services, which can be more complex and
require different approaches to acquire than purchases of goods. Our
prior work has found that appropriate planning, structuring, and
monitoring of acquisitions is critical to ensuring the services
provided meet the Government's needs.\1\ The growing complexity of
contracting for technically difficult and sophisticated services
increases the challenges of setting appropriate requirements and
effectively overseeing contractor performance. At the same time, other
factors, such as pressure to get programs up and running, and
technological challenges have impacted DHS's ability to achieve good
acquisition outcomes.
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\1\ For example, GAO, Defense Acquisitions: Tailored Approach
Needed to Improve Service Acquisition Outcomes, GAO-07-20 (Washington,
DC: Nov. 9, 2006).
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My statement today is drawn from our body of work on DHS's
acquisition management. I will discuss DHS's progress and areas for
improvement in developing its acquisition function and DHS's
acquisition planning and oversight. Specifically, I will highlight
relevant findings from our work on contractors hired to perform
management and professional support services, and the use of selected
procurement methods, such as interagency contracting and performance-
based acquisitions. We conducted these performance audits in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
SUMMARY
DHS has made some progress in acquisition management--recognizing
the need to improve acquisition outcomes and taking some steps to
organize and assess the acquisition function. However, we have reported
that more needs to be done to develop clear and transparent policies
and processes for all acquisitions and to develop an acquisition work
force to execute and monitor acquisitions. Additionally, our work has
found that acquisition planning and oversight for procurement and major
acquisitions need improvement. With regard to planning, we found that
DHS did not assess the risk of hiring contractors to perform
professional and management support services that have the potential to
increase the risk that Government decisions may be influenced by,
rather than independent from, contractor judgments. For services
procured through interagency contracting, we found acquisition planning
was lacking. DHS did not always consider alternatives to ensure good
value when selecting among interagency contracts. We have also
identified a number of shortcomings in DHS's use of a performance-based
approach for complex acquisitions. Earlier this year, we reported that
contracts for eight major investments at Coast Guard, Customs and
Border Protection (CBP), and the Transportation Security Administration
(TSA) did not always have well-defined requirements, a complete set of
measurable performance standards, or both at the time of contract award
or the start of work, and that these contracts experienced cost
overruns, schedule delays, or did not otherwise meet performance
expectations. With regard to oversight, while the Chief Procurement
Officer (CPO) has recently implemented a Department-wide oversight
program, evaluations of the outcomes of acquisition methods and
contracted services have not yet been conducted. The CPO continues to
face challenges in maintaining the staffing levels needed to fully
implement the oversight program, and CPO authority to ensure that
components comply with the procurement oversight plan remains unclear.
BACKGROUND
DHS has some of the most extensive acquisition needs within the
Federal Government. In fiscal year 2007, DHS obligated about $12
billion to acquire goods and services ranging from the basic goods and
services Federal agencies purchase, such as information technology
equipment and support, to more complex and unique acquisitions, such as
airport security systems and Coast Guard ships.
DHS and its component agencies have faced a number of challenges
related to procuring services and major system acquisitions. When DHS
was formed in 2003, it was responsible for integrating 22 agencies with
disparate missions. Of these, only seven came with their own
procurement offices, only some of which had also managed complex
acquisitions such as the Coast Guard's Deepwater program or TSA's
airport screening programs.
While the Homeland Security Acquisition Manual and the Federal
Acquisition Regulation (FAR) do not distinguish between the terms
acquisition and procurement, DHS officials have noted that
procurement--the actual transaction to acquire goods and services--is
only one element of acquisition. The term acquisition can include the
development of operational and life-cycle requirements, such as
formulating concepts of operations, developing sound business
strategies, exercising prudent financial management, assessing trade-
offs, and managing program risks.
DHS HAS MADE SOME PROGRESS IN ACQUISITION MANAGEMENT
We have identified three key performance areas for acquisition
management: assessing and organizing acquisition functions to meet
agency needs; developing clear and transparent policies and processes
for all acquisitions; developing an acquisition work force to implement
and monitor acquisitions. Our prior work has shown that these are among
the key elements of an efficient, effective, and accountable
acquisition function.\2\ We testified in April 2008 that, despite its
initial positive acquisition management efforts, several challenges
remained.\3\ The following summarizes each of these three areas:
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\2\ GAO, Framework for Assessing the Acquisition Function at
Federal Agencies, GAO-05-218G (Washington, DC: September 2005).
\3\ GAO, Department of Homeland Security: Progress Made in
Implementation of Management Functions, but More Work Remains, GAO-08-
646T (Washington, DC: April 9, 2008).
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Assessing and organizing the acquisition function.--Since it
was created in 2003, DHS has recognized the need to improve
acquisition outcomes, and has taken some steps to organize and
assess the acquisition function. DHS has worked to integrate
the disparate acquisition processes and systems that the
component organizations brought with them when the Department
was created. To help assess acquisition management, in 2005 the
Department developed an oversight program. This program
incorporates DHS policy, internal controls, and elements of an
effective acquisition function.\4\ This program has been
partially implemented and monitors component-level performance
through four recurring reviews: Self-assessments; operational
status; on-site; and acquisition planning. However, DHS has not
yet accomplished its goal of integrating the acquisition
function across the Department. For example, the structure of
DHS's acquisition function creates ambiguity about who is
accountable for acquisition decisions because it depends on a
system of dual accountability and cooperation and collaboration
between the CPO and the component heads. DHS officials stated
in June 2007 that that they were in the process of modifying
the lines of business management directive to clarify the CPO's
authority; however, this directive has yet to be approved.
---------------------------------------------------------------------------
\4\ GAO, Department of Homeland Security: Progress and Challenges
in Implementing the Department's Acquisition Oversight Plan, GAO-07-900
(Washington, DC: June 2007).
---------------------------------------------------------------------------
Developing clear and transparent polices and processes.--DHS
had made some progress in this area but has generally not
developed clear and transparent policies and processes for all
acquisitions. Specifically, DHS put into place an investment
review process in 2003 that adopts many acquisition best
practices to help the Department reduce risk and increase the
chances for successful investment in terms of cost, schedule,
and performance. However, in 2005, we found that the process
did not include critical management reviews.\5\ Further, our
work has identified concerns with the implementation of the
investment review process. In 2007, we reported that DHS had
not fully implemented key practices of its investment review
process to control projects. For example, we reported that DHS
executives may not have the information they need to determine
whether information technology investments are meeting
expectations, which may increase the risk that underperforming
projects are not identified and corrected in a timely
manner.\6\ We have on-going work on the implementation of DHS's
investment review process scheduled to be released later this
year.
---------------------------------------------------------------------------
\5\ GAO, Department of Homeland Security: Successes and Challenges
in DHS's Effort to Create an Effective Acquisition Organization, GAO-
05-179 (Washington, DC: Mar. 29, 2005).
\6\ GAO, Information Technology: DHS Needs to Fully Define and
Implement Policies and Procedures for Effectively Managing Investments,
GAO-07-424 (Washington, DC: April 27, 2007).
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Developing an acquisition work force to implement and
monitor acquisitions.--DHS has taken initial steps needed to
develop an acquisition work force. In 2006, DHS reported
significant progress in providing staff for the component
contracting offices, though much work remained to fill the
positions with qualified, trained acquisition professionals.
DHS has also taken a positive step by authorizing additional
staff for the CPO to provide staff for procurement oversight,
program management and cost analysis functions. We have on-
going work on DHS's acquisition work force scheduled to be
released later this year.
PLANNING FOR PROCUREMENT AND MAJOR ACQUISITIONS NEED IMPROVEMENT
Our work on both services contracting and major investments has
consistently identified the need for improved acquisition planning to
better ensure taxpayer dollars are spent prudently. Acquisitions must
be appropriately planned and structured to minimize the risk of the
Government receiving services that are over cost estimates, delivered
late, and of unacceptable quality.\7\ Specifically, we have emphasized
the importance of clearly defined requirements to achieving desired
results, and measurable performance standards to ensuring control and
accountability. Too often, our work on Federal acquisitions has
reported that unrealistic, inadequate, or frequently changing
requirements have left the Government vulnerable to wasted taxpayer
dollars.\8\ For services closely supporting inherently governmental
functions, we found that DHS did not use risk assessment in its plans
to hire contractors to provide these services.\9\ For services procured
through methods such as interagency and performance-based contracting,
we found acquisition planning was lacking.\10\ For major systems,
acquisition planning includes establishing well-defined requirements
and ensuring appropriate resources, such as adequate staffing and
expertise, are in place to manage the investments; yet we have
consistently found that these key elements are not in place.
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\7\ GAO-07-20.
\8\ GAO, Federal Acquisitions and Contracting: Systemic Challenges
Need Attention, GAO-07-1098T (Washington, DC: July 17, 2007).
\9\ GAO, Department of Homeland Security: Improved Assessment and
Oversight Needed to Manage Risk of Contracting for Selected Services,
GAO-07-990 (Washington, DC: September 2007).
\10\ GAO, Interagency Contracting: Improved Guidance, Planning, and
Oversight Would Enable the Department of Homeland Security to Address
Risks, GAO-06-996 (Washington, DC: September 2006), and GAO, Department
of Homeland Security: Better Planning and Assessment Needed to Improve
Outcomes for Complex Service Acquisitions, GAO-08-263 (Washington, DC:
April 2008).
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Inadequate Procurement Planning
While there are benefits to using contractors to perform services
for the Government--such as increased flexibility in fulfilling
immediate needs--we and others have raised concerns about the Federal
Government's increased reliance on contractor services. Of key concern
is the risk associated with a contractor providing services that
closely support inherently governmental functions: the loss of
Government control over and accountability for mission-related policy
and program decisions. Professional and management support services,
including program management and support services such as acquisition
support, budget preparation, intelligence services, and policy
development, closely support inherently governmental functions. To help
ensure that the Government does not lose control over and
accountability for such decisions, longstanding Federal procurement
policy requires attention to the risk that Government decisions may be
influenced by, rather than independent from, contractor judgments when
contracting for services that closely support inherently governmental
functions. This type of risk assessment is also part of the acquisition
planning process. While DHS program officials generally acknowledged
that their professional and management support services contracts
closely supported inherently governmental functions, they did notassess
the risk of contractors providing these services. The nine cases we
reviewed in detail provided examples of cases in which contractors
provided services integral to and comparable to those provided by
Government employees; contractors provided on-going support; and
contract requirements were broadly defined. These conditions need to be
carefully monitored to help ensure the Government does not lose control
over and accountability for mission-related decisions. To improve DHS's
ability to manage the risk of selected services that closely support
inherently governmental functions, as well as Government control over
and accountability for decisions, we recommended that DHS establish
strategic-level guidance on and routinely assess the risk of using
contractors for selected services and more clearly define contract
requirements.
DHS's use of interagency contracting--a process by which one agency
uses another agency's contracts and contracting services--is another
area we have identified acquisition planning was lacking. While
interagency contracting offers the benefits of efficiency and
convenience, in January 2005, we noted shortcomings and designated the
management of interagency contracting as a Government-wide high-risk
area. Our work on DHS's use of interagency contracting showed that the
Department did not always select interagency contracts based on
planning and analysis and instead made decisions based on the benefits
of speed and convenience. We found that DHS conducted limited
evaluation of contracting alternatives to ensure good value when
selecting among interagency contracts. While interagency contracting is
often chosen because it requires less planning than establishing a new
contract, evaluating the selection of an interagency contract is
important because not all interagency contracts provide good value when
considering both timeliness and total cost. Although DHS guidance has
required planning and analysis of alternatives for all acquisitions
since July 2005, we found that it was not conducted for the four cases
in our review for which it was required. To improve the management of
interagency contracting, we recommended that DHS develop consistent,
comprehensive guidance and training and establish criteria to consider
in selecting an interagency contract.
Major Investments Using a Performance-Based Approach
To help improve service acquisition outcomes, Federal procurement
policy calls for agencies to use a performance-based approach to the
maximum extent practicable. This approach includes: a performance work
statement that describes outcome-oriented requirements, measurable
performance standards, and quality assurance surveillance. In using a
performance-based approach, the FAR requires contract outcomes or
requirements to be well-defined, that is, providing clear descriptions
of results to be achieved. Our prior reviews of complex DHS investments
using a performance-based approach point to a number of shortcomings.
For example, in June 2007, we reported that a performance-based
contract for a DHS financial management system, eMerge2, lacked clear
and complete requirements, which led to schedule delays and
unacceptable contractor performance.\11\ Ultimately, the program was
terminated after a $52 million investment. The DHS Inspector General
has also indicated numerous opportunities for DHS to make better use of
sound practices, such as well-defined requirements.\12\
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\11\ GAO, Homeland Security: Departmentwide Integrated Financial
Management Systems Remain a Challenge, GAO-07-536 (Washington, DC: June
21, 2007).
\12\ See for example, Department of Homeland Security Inspector
General, Major Management Challenges Facing the Department of Homeland
Security, OIG-08-11 (January 2008), and Department of Homeland Security
Inspector General, Transportation Security Administration's Information
Technology Managed Services Contract, OIG-06-23 (February 2006).
---------------------------------------------------------------------------
Consistent with these findings, our 2008 report on performance-
based acquisitions, for which we reviewed contracts for eight major
investments at Coast Guard, CBP, and TSA, found that contracts for
investments that did not have well-defined requirements, or a complete
set of measurable performance standards, or both, at the time of
contract award or the start of work-experienced cost overruns, schedule
delays, or did not otherwise meet performance expectations.\13\ In
contrast, service contracts for investments that had well-defined
requirements linked to measurable standards performed within budget
meeting the standards in all cases where contractors had begun work.
For example, TSA's Screening Partnership Program improved its
contracted services at the San Francisco International Airport to
incorporate well-defined requirements linked to clearly measurable
performance standards and delivered services within budget. To improve
the outcomes of performance-based acquisitions, we recommended that DHS
improve acquisition planning for requirements for major complex
investments to ensure they are well-defined, and develop consistently
measurable performance standards linked to those requirements.
Following are examples of complex investments with contracts that did
not have well-defined requirements or complete measurable performance
standards and did not meet cost, schedule, or performance expectations.
---------------------------------------------------------------------------
\13\ GAO-08-263.
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Contracts for systems development for two CBP major investments--
Automated Commercial Environment (ACE) and Secure Border Initiative
(SBInet)--lacked both well-defined requirements and measurable
performance standards prior to the start of work and both experienced
poor outcomes. The first, for DHS's ACE Task Order 23 project--a trade
software modernization effort--was originally estimated to cost $52.7
million over a period of approximately 17 months.\14\ However, the
program lacked stable requirements at contract award and, therefore,
could not establish measurable performance standards and valid cost or
schedule baselines for assessing contractor performance. Software
requirements were added after contract award, contributing to a project
cost increase of approximately $21.1 million, or 40 percent, over the
original estimate. Because some portions of the work were delayed to
better define requirements, the project is not expected to be completed
until January 2011--over 3 years later than originally planned.
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\14\ Begun in 2001, ACE is intended to replace and supplement
existing cargo processing technology and will be developed and deployed
in a series of increments. The goals of ACE include: (1) Supporting
border security by enhancing analysis and information sharing with
other Government agencies and providing CBP with the means to decide
before a shipment reaches the border if it should be targeted or
expedited; and, (2) streamlining time-consuming and labor-intensive
tasks for CBP personnel and the trade community through a national
trade account and single Web-based interface. Task Order 23 was the
sole focus of our review.
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The second, Project 28 for systems development for CBP's SBInet--a
project to help secure a section of the United States-Mexico border
using a surveillance system--did not meet expected outcomes due to a
lack of both well-defined requirements and measurable performance
standards. CBP awarded the Project 28 contract planned as SBInet's
proof of concept and the first increment of the fielded SBInet system
before the overall SBInet operational requirements and system
specifications were finalized. More than 3 months after Project 28 was
awarded, DHS's Inspector General reported that CBP had not properly
defined SBInet's operational requirements and needed to do so quickly
to avoid rework of the contractor's systems engineering. We found that
several performance standards were not clearly defined to isolate the
contractor's performance from that of CBP employees, making it
difficult to determine whether any problems were due to the
contractor's system design, CBP employees, or both. As a result, it was
not clear how CBP intended to measure compliance with the Project 28
standard for probability of detecting persons attempting to illegally
cross the border. Although it did not fully meet user needs and its
design will not be used as a basis for future SBInet development, DHS
fully accepted the project after an 8-month delay.\15\ In addition, DHS
officials have stated that much of the Project 28 system will be
replaced by new equipment and software. However, Project 28 is just one
part of the entire Secure Border Initiative, and our recent work has
noted that requirements and testing processes for the initiative have
not been effectively managed, and important aspects of the program
remain in flux.\16\
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\15\ GAO, Secure Border Initiative: Observations on the Importance
of Applying Lessons Learned to Future Projects, GAO-08-508T
(Washington, DC: Feb. 27, 2008).
\16\ GAO, Secure Border Initiative: DHS Needs to Address
Significant Risks in Delivering Key Technology Investment, GAO-08-1148T
(Washington, DC: Sept. 10, 2008).
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Additionally, our work has found that the Coast Guard's Deepwater
Program, on-going since the late 1990's, is intended to replace or
modernize 15 major classes of Coast Guard assets. In March 2007, we
reported that the Coast Guard's Deepwater contract had requirements
that were set at unrealistic levels and were frequently changed.\17\
For some of the Deepwater assets, this resulted in cost escalation,
schedule delays, and reduced contractor accountability over a period of
many years of producing poor results such as ships that experienced
serious structural defects. In light of these serious performance and
management problems, Coast Guard leadership has changed its approach to
this acquisition.\18\ It has taken over the lead role in systems
integration, which was formerly held by a contractor. Formerly, the
contractor had significant program management responsibilities, such as
contractual responsibility for drafting task orders and managing the
system integration of Deepwater as a whole. Coast Guard project
managers and technical experts now hold the greater balance of
management responsibility and accountability for program outcomes.
Coast Guard officials have begun to hold competitions for Deepwater
assets outside of the lead system integrator contract, and cost and
schedule information is now captured at a level that has resulted in
improved visibility, such as the ability to track and report cost
breaches for assets. The Coast Guard has also begun to follow a
disciplined project management framework, requiring documentation and
approval of decisions at key points in a program's life cycle. However,
like other Federal agencies, the Coast Guard has faced challenges in
building an adequate Government work force and is relying on support
contractors in key positions, such as cost estimators and contract
specialists.
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\17\ GAO, Coast Guard: Status of Efforts to Improve Deepwater
Program Management and Address Operational Challenges, GAO-07-575T
(Washington DC: Mar. 8, 2007).
\18\ GAO, Coast Guard: Change in Course Improves Deepwater
Management and Oversight, but Outcome Still Uncertain, GAO-08-745
(Washington, DC: June 24, 2008).
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OVERSIGHT CONSISTENTLY IDENTIFIED AS NEEDING IMPROVEMENT
Our work on contractors performing services closely supporting
inherently governmental functions found that DHS program officials and
contracting officers were not aware of Federal requirements for
enhanced oversight for these types of services. Both the FAR and the
Office of Management and Budget's Office of Federal Procurement Policy
(OFPP) policy state that when contracting for these types of services a
sufficient number of qualified Government employees assigned to plan
and oversee these contractor activities is needed to maintain control
and accountability. For the nine cases we reviewed, the level of
oversight provided did not always help ensure accountability for
decisions or the ability to judge whether contractors were performing
as required.\19\ We found cases in which the DHS components lacked the
capacity to oversee contractor performance due to limited expertise and
workload demands. DHS components were also limited in their ability to
assess contractor performance in a way that addressed the risk of
contracting for services that closely support inherently governmental
functions. Assessing contractor performance requires a plan that
outlines how services will be delivered and establishes measurable
outcomes. However, none of the oversight plans and contract documents
we reviewed contained specific measures for assessing contractor
performance of selected services. To address this deficiency, we
recommended that DHS assess the ability of its work force to provide
sufficient oversight when using these types of contracted services.
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\19\ FAR section 37.114, Special Acquisition Requirements; OFPP
Policy Letter 93-1: Management Oversight of Service Contracting, Office
of Federal Procurement Policy, May 18, 1994.
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Limited oversight also is due in part to insufficient data to
monitor acquisitions. Our work on procurement methods, such as
interagency contracting and performance-based acquisition, has found
that DHS does not systematically monitor its use of these contracts to
assess whether these methods are being properly managed, or to assess
costs, benefits, or other outcomes of these acquisition methods. With
regard to interagency contracting, we found that DHS was not able to
readily provide data on the amounts spent through different types of
contracts or on the fees paid to other agencies for the use of their
contracting services or vehicles. This lack of information means that
DHS cannot assess whether the Department could achieve savings through
using another type of contracting vehicle. We similarly found that DHS
did not have reliable data on performance-based acquisitions to
facilitate required reporting, informed decisions, and analysis of
acquisition outcomes. For example, our review of contracts at the Coast
Guard, CBP, Immigration and Customs Enforcement (ICE), and TSA showed
that, about 51 percent of the 138 contracts we identified in FPDS-NG as
performance-based had none of the required performance-based elements:
A performance work statement; measurable performance standards; and a
method of assessing contractor performance against performance
standards. The unreliability of these data makes it difficult for DHS
to be able to accurately report on Government-wide performance targets
for performance-based acquisitions. We have recommended that DHS work
to improve the quality of FPDS-NG data so that DHS can more accurately
identify and assess the quality of the use and outcomes of various
procurement methods.
Inaccurate Federal procurement data is not unique to DHS and is a
long-standing Government-wide concern. Our prior work and the work of
the General Services Administration's Inspector General have identified
issues with the accuracy and completeness of FPDS and FPDS-NG data,\20\
and OMB has stressed the importance of submitting timely and accurate
procurement data to FPDS-NG. The Acquisition Advisory Panel \21\ has
also raised concerns about the accuracy of FPDS-NG data.\22\ These
circumstances illustrate the magnitude of the challenge DHS faces in
developing timely and accurate data to monitor acquisitions.
---------------------------------------------------------------------------
\20\ For example, GAO, Reliability of Federal Procurement Data,
GAO-04-295R (Washington, DC: Dec. 30, 2003); GAO, Improvements Needed
to the Federal Procurement Data System--Next Generation, GAO-05-960R
(Washington, DC: Sept. 27, 2005); and General Services Administration
Inspector General, Review of the Federal Procurement Data System--Next
Generation (FPDS-NG), Report Number A040127/O/T/F06016 (March 2006).
\21\ Authorized by section 1423 of the Services Acquisition Reform
Act of 2003 as part of the National Defense Authorization Act of 2004.
Pub. L. No. 108-136.
\22\ Report of the Acquisition Advisory Panel to the Office of
Federal Procurement Policy and the U.S. Congress. January 2007.
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To improve procurement oversight, the CPO established and has
implemented a Department-wide program to provide comprehensive insight
into each component's programs and disseminate successful management
techniques throughout DHS.\23\ This program, which is based on a series
of component-level reviews, was designed with the flexibility to
address specific procurement issues. As such, it could be used to
address areas such as performance-based acquisitions, interagency
contracting, and the appropriate use of contractors providing services
closely supporting inherently governmental functions. Some of the four
key oversight reviews have begun under this program, but management
assessments, or evaluation of the outcomes of acquisition methods and
contracted services, have not been conducted. Our work has found that
the CPO continues to face challenges in maintaining the staffing levels
needed to fully implement the oversight program, and CPO authority to
ensure that components comply with the procurement oversight plan
remains unclear.
---------------------------------------------------------------------------
\23\ GAO-07-900.
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CONCLUSION
Improving acquisition outcomes has been an on-going challenge since
DHS was established in 2003. Our work has consistently noted that sound
acquisition planning, including clearly defining requirements, and
ensuring adequate oversight are hallmarks of successful service
acquisitions. A sufficient acquisition work force is also key to
properly managing acquisitions. Our body of work has also included many
recommendations to the Secretary of Homeland Security to take actions
aimed at improving acquisition management, planning, and oversight.
While DHS has generally concurred with our recommendations, the
Department has not always stated how the underlying causes of the
deficiencies we have identified will be addressed. Until the Department
takes needed action to address these causes, it will continue to be
challenged to make the best use of its acquisition dollars.
Mr. Chairman, this concludes my prepared statement. I would be
happy to respond to any questions that you or other Members of the
subcommittee may have at this time.
Mr. Carney. Thank you, Mr. Hutton.
I would like to thank all the Members for their testimony.
I would like to remind everybody here, the three of us,
that we will have 5 minutes to question the panel. I will start
with myself first.
Mr. Gunderson, it has been noted the size of the
Department's acquisition work force has not been large enough.
I think you mentioned you have increased the number from 600 to
1,000 from 2003 to present, but still not large enough to
manage the high level of procurements that you have today.
Do you think it is large enough?
Mr. Gunderson. No, I do not.
First, I also want to distinguish between the contracting
staff needed as well as the other acquisition disciplines,
because, obviously, acquisition is made up of all the different
disciplines I mentioned in my testimony.
Contracting career field, 1102 series, has been a
significant challenge in ramping it up, given the demand that
we have, especially in the D.C. area. We have looked at
standing up offices across the country as well, where it makes
sense for some of the components. But when you are competing in
the D.C. area for a lot of these positions with the DOD
presence, we continue to struggle there.
But we do have an intern program that we have instituted.
In fiscal year 2008, we have brought on three cohorts, groups
of interns. So, by the end of this month, we are going to have
roughly 49 contract specialist interns that will be on board in
our training program.
Mr. Carney. Of the thousand or so you have on board now,
what is the rough ratio of Government employees to contractors
in the procurement?
Mr. Gunderson. Performing contracting specialist roles?
Mr. Carney. Correct, yes.
Mr. Gunderson. I don't have the exact numbers, but I think
the number is certainly under 5 percent. I think it is a small
number of contractors that are providing that type of service.
When I was at TSA and we had roughly 100 people in the
office, we had less than five people that were performing that
type of role. We were phasing them out as we were able to grow
the organic capability.
Mr. Carney. Okay.
Shifting gears slightly here, what do you think would be,
sort of, the maximum amount in dollar terms that a single
program manager should be responsible for overseeing?
Mr. Gunderson. I wouldn't look at it from a dollar
perspective, because if you look at certain programs, you could
have one--if you are in the Navy and you are buying an aircraft
carrier, that is going to be one significant dollar figure. At
the same time, you could have someone who is managing multiple
programs. I would look at the different programs that you would
have to manage from a workload perspective. You don't want to
have people having multiple responsibilities managing multiple
programs. You want to be able to focus on the given objectives
of the mission that is put before you.
Mr. Carney. Okay, fair enough.
Now, several instances, like Secure Flight, SBInet, HSIN,
for example, the Department entered into a contract with the
same contractor after the initial contract for the same or
similar program failed.
How does the Department justify using the same contractors
over and over again, in some instances in the sole source
capacity? You have actually produced sort-of subpar results.
Why do we continue to do that?
Mr. Gunderson. I am not familiar with each of the programs
that you mentioned. You said SBI was one of the programs?
Mr. Carney. Yes.
Mr. Gunderson. Obviously a contract was awarded to Boeing
there, and that contract has different pieces to it, both the
technology side as well as defense. They performed different
task orders. It is a multiple award contract, so it is not that
we are awarding new contracts, we are awarding new tasks under
a basic contract that was awarded to them which allows for
incremental evolution of the program, so that they are going to
be--for example, in P28, Project 28, it was basically a proof
of concept task order, where the contractor was asked to assess
different technologies to see how they were suitable for
meeting the operator's needs. Then they will continue to go off
from there to take lessons learned from that.
Mr. Carney. I think one of the lessons learned, certainly
that Boeing testified to, is that they didn't put their A team
on that one. We weren't quite sure how far down the alphabet
they did go, but they needed to do better.
So, you know, I think it is fair, I think the taxpayers
deserve to know if we are hiring various contractors and it is
subpar. You know, par is pretty good, but if it is--well, if we
are going to use golf terms, if it is over par, which is bad,
then we shouldn't be rewarding them for that efforts.
Okay, the Chair now recognizes the gentleman from Alabama.
Mr. Rogers. Thank you, Mr. Chairman.
Mr. Taylor, one of the things I heard you offer as a
recurring theme was that you saw in these poorly performed
contracts a sense of urgency, was the phrase you used
repeatedly.
Tell me more about how you saw that, historically, as being
problematic.
Mr. Taylor. Starting with Deepwater, it was a pre-existing
contract to DHS, but it was a situation where there was a
perceived urgent need to replace aging fleet, as well as a lot
of pressure from Congress because the Coast Guard wasn't moving
as quickly as deemed necessary. So they essentially turned over
the whole enterprise, the oversight itself, to contractors, a
consortium. There was no competition. So they thought that was
a streamlined approach. The consortium could tell them to
address their requirements and could tell them how to address
those requirements and build the correct ships to go forward.
In FEMA's case, the disasters that occur, they go out and
they have a situation like Katrina. The one area where FEMA was
the weakest was on catastrophic disasters, and particularly in
catastrophic housing. When that occurred, they tried to do it
on the fly. When you get that, you get some of the things we
talked about last week in our report and you also get a lot of
the other things you read about in the paper. There are--even
though there are times you have to respond quickly and you have
to do things.
Mr. Rogers. You made reference to things you read about in
the paper, and I want to go back to what was in today's
Washington Post.
Mr. Taylor. I am sorry, sir, I was referring to our report
we released last week.
Mr. Rogers. Go ahead. I am sorry.
Mr. Taylor. This is the ITAC report. We released it last
week.
In those situations, even though they are catastrophic
occurrences, we shouldn't have to put ourselves in a place
where we have to do it on the fly. That is exactly what
happened in that case and in a bunch of other cases we reported
on over the years.
Mr. Rogers. Well, I do want to go to today's Washington
Post article, because it talks about how $200 million was
mismanaged and poorly spent. However, in your opening
statement, you made reference to the trailers and you mentioned
$46 million.
Which is the accurate figure?
Mr. Taylor. In our report, we specifically identified $46
million that FEMA incurred in costs they shouldn't have because
of their inability to identify and review vouchers and invoices
that were coming in from the vendors.
The actual number--that is a conservative number--the
actual amount of money that we spent we probably shouldn't have
is probably higher because of the nature of the contracts. But
the $200 million I can't speak to.
Mr. Rogers. Okay. So you don't know if that is accurate or
not then?
Mr. Taylor. No, sir.
Mr. Rogers. I also noticed, in the same Washington Post
article, it made reference to the $1.5 billion Boeing program
for the Secure Border Initiative, SBI. It talks about how there
was a shelving of that initiative, when, in fact, my
understanding is that what was done was that they took the
technological aspects of the Secure Border Initiative and put
them aside while they made a priority of putting the fence up.
Have they shelved that technology, to your knowledge?
Mr. Taylor. I couldn't answer the question, sir. But, to my
knowledge, they haven't shelved the technology. But we have not
looked at that area.
Mr. Rogers. Mr. Gunderson, I will talk to you a little bit
about your response to the Chairman's question on numbers of
procurement officers. Is it your sense that the problems that
we are seeing in DHS procurement is solely a result of
insufficient resources for the personnel?
Mr. Gunderson. It is not just resources. I mean, if you
look at the three priorities that are put forth from the CPO,
work force is one of those. Again, that is contracting and
other acquisition disciplines. In addition to that, it is a
process issue. The Department is moving forward in that area. I
mentioned in my testimony that----
Mr. Rogers. Give me a couple of examples about what you
mean by moving forward.
Mr. Gunderson. Okay. To date, we have had what is called
Management Directive 1400, which basically provided the
framework for investment reviews. This system has been not
linked with the other important aspects of an acquisition
program, such as requirements and budgeting. So the new program
that is being put in place should be released within the next
couple of months. It is going to integrate all those pieces
together and ensure that we are going to have requirements that
are validated, planned and budgeted for, and be prepared to
execute.
Mr. Rogers. Do you have any idea why that wasn't taking
place already?
Mr. Gunderson. The previous management directive that was
put in place, again, it was a first step. I look at it from an
evolutionary standpoint. When the Department stood up, again,
back in the 2003 time frame, there was only a handful of people
within CPO. So, as we have now been able to bring in the right
people who have the expertise--this group is being led by a
former dean of Defense Acquisition University, as well as a
very competent staff, and being able to do it right.
Mr. Rogers. So, in sum, what I gather from what you just
said is that, while it has been unfortunate, this has not been
an unreasonable developmental stage over the last several years
in this growing departmental responsibility.
Mr. Gunderson. I would concur with that.
Mr. Rogers. Thank you.
I yield back, Mr. Chairman.
Mr. Carney. Thank you.
The Chair now recognizes the Chairman of the full
committee, the gentleman from Mississippi, Mr. Thompson.
Mr. Thompson. Thank you.
I would assume from your answer to Mr. Rogers's last
question that you would expect waste and mismanagement to be a
part of your operation?
Mr. Gunderson. No, I don't believe waste is a part of the
operation.
Mr. Thompson. Well, please feel free to elaborate on your
last answer, because that was the interpretation I received
from your answer.
Mr. Gunderson. What I was explaining is that the process
for governing our acquisitions has taken an evolution from the
beginning of our stand-up to where we are today. We are
strengthening that process, making sure that we have the people
to be able to make the right decisions in place and that the
programs come up at the right points in time before they
proceed any further.
Frankly, portraying some of these programs and contracts as
wasteful, I don't necessarily agree with that. A lot of times
these contracts have dealt with what I call preproduction
environments, so we are dealing with a lot of design and
development and testing, and we are qualifying things before we
move out into production. I think it is the same thing that you
would find at DOD.
Mr. Thompson. Well, we differ. Let me give you a couple of
examples on how we differ on waste and abuse.
Do you have any knowledge of the Deepwater contract?
Mr. Gunderson. I have a little bit of familiarity with it.
Mr. Thompson. Are you aware that we lost several hundred
millions of dollars on that contract and the boats didn't
float?
Mr. Gunderson. Yes, I understand.
Mr. Thompson. So that, in our mind, is a problem. It was a
procurement problem. So, I think our responsibility, as a
committee, is to try to limit that. Part of the oversight
responsibility is, if it is a matter of you needing more people
to be trained, we would be happy to provide it, but we need in
our oversight responsibility to get the facts.
The two gentlemen to your left have, for all intents and
purposes, said that there are some things they would recommend
that you do in order to get there. I did not hear whether or
not you formally responded to the report or not. Have you?
Mr. Gunderson. Which particular report?
Mr. Thompson. The IG report from last week.
Mr. Taylor. Yes, they did, sir. The Department did respond
to our ITAC report that was released last week, and they
concurred with the majority of our recommendations.
Mr. Thompson. Okay. Well, and that is the point I am trying
to get to, is now that we have a framework to work from, our
goal is to try to get there as fast as we can.
One of the criticisms we hear is the overreliance on
contractors. Your testimony today sort of gave us the fact that
that is no longer a real problem within the Department because
you have ramped up enough through your various programs that
that is no longer a concern of yours.
Am I interpreting your testimony correct?
Mr. Gunderson. We always take a look at our acquisitions as
we move forward to assess the role of contractors in them. So
are we saying that we are 100 percent where we want to be with
respect to that? No. But there are several examples of where we
have gone from an original business strategy which did rely on
contractors heavily and move forward to where we are using an
organic capability to manage those programs.
So, while we are not totally to where we want to be, we
have made significant progress. We will continue to assess each
situation.
Mr. Thompson. So are you aware of any contracting conflicts
of interest that might presently exist within procurement?
Mr. Gunderson. No.
Mr. Thompson. Can you provide this committee with any of
those conflicts that have previously occurred that have been
resolved? Or you don't know any?
Mr. Gunderson. I am not aware of any, but if you are asking
for us to go back and examine that, we can.
Mr. Thompson. Well, let me give you one. Some of the
contractors that were tasked with overseeing the SBInet
contract were business partners of Boeing. Some of us think
that is a potential conflict.
I would like to know, if that conflict is there, what, if
any, measures are in place to prevent this type of conflict
going forward?
Mr. Gunderson. Okay. I am not aware of the contractor you
are referencing that was overseeing the Boeing contract.
Mr. Thompson. I will be happy to give it to you.
Mr. Gunderson. Okay.
Mr. Thompson. I am all right.
Mr. Carney. Thank you, Mr. Chairman.
Mr. Taylor, we see that there are several no-bid contracts
out there that the Department awards, meaning that only one
company gets an opportunity to bid on a contract. Can you, kind
of, describe the potentials for abuse that exists in a
situation like that?
Mr. Taylor. Sure. In situations where you have no-bid
contracts, you are running the danger of not getting best
value, not to mention best price. In some cases, depending on
the nature of the contract, like we reported on last week in
the ITAC report, depending on how you write the contract and
oversee it, there is a potential for the contracts to have
uncontrolled growth and for you not to get the results that you
are seeking.
Mr. Carney. This is for any one of you. Do you know roughly
how many no-bid contracts have been awarded in your tenure, Mr.
Gunderson, for example?
Mr. Gunderson. Specific numbers, no. I mean, typically--we
have that data back in the office, yes.
Mr. Carney. We would love to see it, please.
Mr. Gunderson. We usually are tracking percentages of
competition versus noncompetitive actions.
Mr. Carney. Okay.
Mr. Hutton.
Mr. Hutton. I do not have data on that particular question,
sir.
Mr. Carney. Do you have any insight into that? What have
you encountered?
Mr. Hutton. Well, I think the IG representative clearly
pointed out some of the issues associated with that type of
contract.
Mr. Carney. But do you have any sense of the numbers?
Mr. Hutton. No, sir, I do not.
Mr. Carney. Okay, okay. Thanks.
So do we know if we have seen a higher level of
mismanagement of no-bids versus competitive contracts? Mr.
Taylor.
Mr. Taylor. We actually have an on-going audit report now,
a review going on as we speak, of noncompetitive contracts, and
we are hoping to have that out by the first of the year.
Mr. Carney. Post haste, please.
Mr. Taylor. Yes, sir.
Mr. Carney. Appreciate it.
Mr. Gunderson, so what are some of the--let's think a
little bit creatively here on what DHS is trying to do to
increase the number of procurement officers and contracts. Is
there anything else going on? You have this internship program,
but do you have something else?
Mr. Gunderson. The internship I think is the primary
mechanism to rebuilding our contracting community. But at the
same time, as I mentioned, we continue to look at all grade
levels.
Also, I think was mentioned at the beginning also about
looking at folks that have maybe retired and bringing them back
as rehired annuitants. Again, we think that this is a valuable
tool, to bring those people in and to mentor the significant
number of junior folks that we are bringing on board.
Mr. Carney. Now, the interns come from where? Within
Government? From colleges? How does this work?
Mr. Gunderson. Primarily colleges. We do a significant
amount of recruiting across the country. There are some people
who have come in with previous business experience. While we
are doing the recruiting at the colleges, we also have plenty
of other advertisements in seeking people who are interested in
that sort of training program.
It is a very appealing program. As we bring on the interns
and we ask them what attracted them to the program, they say
they liked the disciplined approach and the training that they
were going to receive.
Mr. Carney. The training they were going to receive at DHS
you mean?
Mr. Gunderson. Through the 3-year program, yes.
Mr. Carney. Can you describe--hopefully, I want a good
number here--kind of, the growth in the number of interns? How
long has this internship program been in place, and what have
you noticed in trends so far?
Mr. Gunderson. As a centralized program at DHS, fiscal year
2008 was its first year. So, as I mentioned earlier, we were
going to be about 49.
But previous to that, if you look at the individual
components, they were also doing similar efforts. So we are now
bringing it together into one centralized program.
While I was at TSA, we had 3 different years of junior
specialists that were brought on, probably totally in the 50
range as well.
Mr. Carney. Okay.
Mr. Hutton, what do you think would be the optimum number
of procurement officers for DHS? We are at a thousand now, and,
according to the testimony, about 50 are contractors. Is that
sufficient? Do we need more? If more, how many more?
Mr. Hutton. Mr. Chairman, I don't have a number for you,
but I wanted to make two key points here. I think it is
instructive to think about the work force, acquisition work
force, in much broader terms than the contract specialist. You
have a lot of other disciplines and expertise needed,
particularly when we are concerned about the large investments.
You have people like systems engineers, you have people that
are involved in cost estimating, you have program managers, you
have those that are the contracting technical reps on
contracts.
All of these folks are people that are involved in these
large acquisitions. I think, by looking at it more broadly, it
allows you to get a better handle on what the current condition
is as to where we are with the acquisition work force. That is
a particular issue that was touched upon, and maybe it is not
fair to say even more than touched upon, by the Acquisition
Advisory Panel. They had a whole section on reliance on
contractors.
Mr. Carney. Okay.
Mr. Gunderson.
Mr. Gunderson. If you don't mind, I would like to add on to
that to give a brief description of what we are doing at the
Department to address those other career fields.
While we have started with the contracting 1102 series, we
are also establishing the certification requirements and
training requirements for our program managers and COTRs.
Obviously COTRs, or contracting officer technical
representatives, are critical to ensuring we get what we buy.
Then also going into systems engineering and tests and
evaluation; we recognize those as key functions. So working on
the certifications and training required for those career
fields.
Mr. Carney. Okay, thank you.
I have exceeded my time. Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman.
I want to pick back up where I left off and address this to
Mr. Taylor or Mr. Hutton.
I try to keep in mind when we are critiquing the Department
in a host of areas that this is the second-largest
reorganization of Government since the creation of the Defense
Department. It has been massive, and it has been taking place
for 5 years. So I asked Mr. Gunderson a little while ago, given
that they started with a handful of officers trying to handle
this activity and now they are up to a thousand, is it a
reasonable level of development to see those problems that we
have seen happen?
I would ask that to you all. Do you all see the development
progressing in a way that is satisfactory to you, given where
they have come from and where they are now as a Department?
I would ask you, Mr. Taylor, first.
Mr. Taylor. Sure. As I mentioned before, we issued our
first management scorecard on the procurement function last
year. At that time, and this is nearly 18 months ago, at that
time we gave them a modest progress report, that there was
modest progress going on in many of the different areas that we
were identifying.
The things that Mr. Gunderson has talked about are in the
planning stage or implementation stage. But they have accepted
over 90 percent of the recommendations we have made regarding
procurement activities in the reports we have issued. So we
think it is a very positive development.
There is a long way to go. We are extremely concerned about
contracting and about overuse of contractors, things like that.
But we do think the Department has a plan. Assuming that
management, senior management, stays focused on this area
during this critical transition, this is an area that could
substantially improve over the coming years.
Mr. Rogers. Overall, though, do you feel that, given where
they came from 5 years ago and where they are now, they are
making a satisfactory level of progress as time walks along?
Mr. Taylor. We are encouraged at the Department level. We
have some concerns at certain components. So for the
Department, yes. It would be component by component beyond
that.
Mr. Rogers. Thank you.
Mr. Hutton, same question.
Mr. Hutton. Certainly we all understand the challenges.
They are taking steps. But just to put a few examples out
there, we were discussing earlier the investment review process
that was put into effect back in 2004, I believe. We looked at
that at the time, and we thought that was a pretty good
process. Yeah, we had some criticisms or suggestions to
strengthen it, but we thought that was a pretty good process to
help guide your major investments along the way.
But as time went on, there haven't been changes based on
our recommendations in the areas that we discussed to date. I
think that the fact that the process has been in revision since
about 2005 raises questions about, well, are these serious
impediments that are keeping us from making this process a
little healthier than not? I am not sure what the answer is to
that, sir.
But I do think that among many fronts you see activities
under way, but I guess I am kind of hoping that we start seeing
a little more closure on some of these activities.
Mr. Rogers. I think we all do. Thank you.
I try to keep in mind when I am talking to folks about the
growth and maturation that we are seeing in the Department
where we have come from. I think evidence of some of the
development, good evidence, is what we just saw with the
hurricanes that we just had on the coast and the way the
Department responded, much more professionally. They had their
act together. They clearly have been learning from past
lessons. Then we had a tornado at Enterprise High School down
in Alabama a few months ago. Again, nothing but rave reviews
for the Department.
So I think that they are getting better in a lot of
different ways. However, as the Chairman, both Chairmen have
pointed out, we have got a long way to go, and we want to make
sure we do better.
I now want to shift to what we can do better and see what
your thoughts are on that. Congressional oversight--you know,
we still have just broad jurisdiction across the Congress
exercising oversight of this Department. I am of the opinion
that is hindering the Department.
Just in a nutshell, I would like to ask each one of you to
tell me, am I right or am I wrong?
Starting with Mr. Gunderson.
Mr. Gunderson. The oversight is significant and it does
have a direct impact on the folks that are doing the business
both at headquarters and at the components. Speaking from my
experience, you know, we talked earlier about the number of
folks that we have on board that are trying to get the job done
well. So when we have the numerous reviews, sometimes
overlapping unfortunately, that takes people away from doing
their core work functional responsibility. It is not to say
that we should not be supporting that and learning from it, but
it does impact operations.
Mr. Rogers. I agree. I think everybody wants oversight. We
just want it to be consolidated in this committee if it is
going to be of the Department of Homeland Security. Mr. Taylor.
Mr. Taylor. Yes, sir. When it comes to the oversight done
at the level of GAO and the IG's office, we make it a point to
coordinate our activities so that we try not to duplicate what
we are doing and make it any worse in the department than we
have to just to do our jobs. In terms of congressional
oversight, yeah, I mean, there was the one 9/11 Commission
recommendation that wasn't adopted. However, when it comes down
to awarding a contract, barring a disaster, I don't think the
number of congressional committees we respond to is going to
have much of a direct impact on their job.
Mr. Rogers. Mr. Hutton.
Mr. Hutton. Mr. Rogers, I would just say that GAO, when we
look at the activities over at the Department and we make our
recommendation, what we are doing at that time is shedding
light on some important issues and we bring them to the
attention of Congress. I do think oversight hearings like this
are very important because I think the oversight hearings and
through our work and through the faithful efforts of DHS to
implement these recommendations I think the hearings bring a
little heat sometimes and when you bring a little heat you
bring some change.
Mr. Rogers. Thank you very much, Mr. Chairman.
Mr. Carney. Thank you, Mr. Rogers. Mr. Thompson, 5 minutes.
Mr. Thompson. Mr. Taylor, for the benefit of me, can you
tell me whether or not there is any procurement standard that
you are using to evaluate DHS that is not the accepted standard
in fellow contracting?
Mr. Taylor. No, sir, we use the standard requirements and
the FAR--we----
Mr. Thompson. So in other words, if you looked at another
failed agency, the procurement standards are the same?
Mr. Taylor. Correct.
Mr. Thompson. So if you take an agency and combine it, all
those agencies combined would use the same procurement
standards? Am I correct?
Mr. Taylor. They are supposed to, sir.
Mr. Thompson. There we go. We are getting to the point. So
if they don't use them, it is not the problem that we have used
a different standard. It is just that some how the people who
are doing it don't measure up.
Mr. Taylor. Or it is the nature of the contract is that the
oversight isn't structured to man these kind of contracts and
the volume.
Mr. Thompson. But the standard is the same?
Mr. Taylor. Yes, sir.
Mr. Thompson. Let us talk about a couple of items that GAO
looked at. Mr. Hutton, you said that the Department kept
inadequate record, the report. Can you elaborate a little bit
on that if you care to?
Mr. Hutton. Well, I will take it this way if you allow me.
I think one key aspect of anything, if you really want to
manage your acquisitions and get a handle on institutionally
across the whole DHS enterprise how we are doing, you need good
data. I think data is an issue we brought up in several of our
reports. Just to throw out an example, we looked at
performance-based service acquisitions, the extent to which DHS
used them. If probably took us as long to get a handle on what
the universe is as best we could so we could then go down and
do drill-downs than might have taken to do the actual work? Why
is that important?
I think if you have data just in this one example on the
use of performance-based service acquisitions, what that is
doing is it allows you to begin getting a sense of, okay, how
well are we doing with those, where are we using them, are we
using certain contracting arrangements that don't make sense
for those type?
Ideally, you like to use fixed-price contracts. To what
extent are we using time and materials for performance-based?
You can only get that through data.
Mr. Thompson. Right. Now, some of your suggestions, if I am
correct, came from an earlier report and you just kind of
updated it when you looked at the Department again and you
found out in many respects the problem was still there.
Mr. Hutton. If I could, sir. Data is, I believe, a very key
part of really again assessing what you are doing and how well
you are doing it. But I would be remiss not to mention that
while it--clearly you can see it as an issue at DHS, it is
really a Government-wide issue in terms of the data systems we
have to manage our procurements and understand exactly what the
Government is buying and how they are buying it. So while it is
DHS-focused as the acquisition advisory panel and GAO pointed
out, it is broader than DHS.
Mr. Thompson. You know, for the record, Mr. Chairman, I
would also just like to point out that, you know, we have had
three procurement officers in 5 years. So, I mean, there is
still a challenge to keep good people in the position long
enough to follow some of what we are doing. Mr. Gunderson, I
hope to see you around next year.
Mr. Gunderson. I plan on being here.
Mr. Thompson. Because part of the continuity of Government
that we look at is having the same people in place long enough
to get some things done. One of the concerns we hear too often
is that every time people interface with the Department, it is
a new face. In managing contracts, sometime, there is a
different person handling a contract than before. So many times
that business has to back up, bring that manager up to speed
and it slows the contract down. Mr. Gunderson, one comment I
will share with you. Some fellow agencies before a program
manager can transfer to another agency or Government, they
require that manager to meet certain tasks so that you just
can't have a failed project and take another job and leave it
to someone else's problem. Now, I think what the Department
ought to look at, as an internal review is whether or not a
policy is similar to that might provide a standard that would
help both the Department and the contractors you are working
with just as a suggestion.
Mr. Gunderson. Understood.
Mr. Thompson. Thank you, Mr. Chairman.
Mr. Carney. Thank you, Mr. Chairman. Mr. Gunderson, what
happened to a first procurement officer? We are on the third
one now. What happened----
Mr. Gunderson. Chief procurement officers. Greg Rothwell
was the original chief procurement officer. He retired. I can't
remember the exact time frame. The second one, Elaine Duke, has
now been elevated to Under Secretary for Management, and
certainly continues to champion our cause.
Mr. Carney. Good. We had a good conversation with her
yesterday and I encourage that relationship to continue. I
think that she will provide sort of continuity after November
that we are certainly going to need. I hope so certainly.
Mr. Gunderson. Just to add on to that, a couple of examples
of steps that she has taken in support of us in establishing
this new framework, she has issued several memos this year for
the entire Department, instituting some new policies and
processes for the establishment of acquisition program based
lines, life-cycle cost estimates and these all need to be
reviewed by subject matter experts at the Department before
these programs can advance.
Mr. Carney. What is going to be the impact of the election
on your shop, turnover-wise?
Mr. Gunderson. Within the CPO office, I am not seeing it as
any impact. We don't have any political appointees within our
office. We are all career and from an operational standpoint,
again, the folks that are doing the work at the components I am
not anticipating an impact associated with the actual
transition.
Mr. Carney. The answer I was looking for is that you will
educate those coming in as to what you need.
Mr. Gunderson. Understood.
Mr. Carney. Okay. Thank you very much. Mr. Rogers, any
further questions?
Mr. Rogers. One last question. I want to visit the issue of
the failure of this Congress to pass an authorization bill and
perhaps not even an appropriations bill. What impact do you
see, if any, that may or may not have on the Department's
ability in the area--subject matter area we have been talking
about. Mr. Hutton, would you start first?
Mr. Hutton. That is a difficult question for me to respond
to because I haven't really considered it in that light.
Mr. Rogers. Mr. Gunderson.
Mr. Gunderson. We would request, or would like to have an
authorization bill to provide more clarity and direction for
where we should be going.
Mr. Rogers. If you end up with nothing but a continuing
resolution, what effect will that have on your ability to get
your job done?
Mr. Gunderson. It would impact in a couple of ways. From an
operational programmatic standpoint, there would be no new
starts that we would be able to move forward on. It would slow
down possibly some of the program initiatives. It would
increase the workload for the staff because you would have to
be, in some cases, doing multiple administrative actions. Most
importantly from my perspective and near and dear to this
organization is the--the budget request that we have forward is
to--would allow to strengthen our acquisition program
management division, as well as our intern program, a CR would
stop those programs in their tracks and we would not be able to
grow the way that everybody is saying we need to grow.
Mr. Rogers. Mr. Taylor.
Mr. Taylor. I think the last area Mr. Gunderson spoke of is
a critical area. But in general, CRs are extremely distracting
for any organization. But in the case of DHS where the Congress
has been increasing the budget and increasing the activities on
an annual basis, it would--without going into any of the
details of what specifically they couldn't do--it would
obviously hinder their efforts to improve.
Mr. Rogers. Thank you. That is all I have, Mr. Chairman.
Mr. Carney. Thank you. I would like to thank the panels for
the testimony and their questions and their answers. You stand
dismissed. We will likely be sending you some written questions
and we would like a prompt response. Thank you very much.
Mr. Carney. I would like to welcome the witnesses, the
second panel. Our first witness is Ms. Marcia D. Madsen. She
served as the Chair of the acquisition advisory panel, a 14-
member advisory panel mandated by Congress to review Federal
contracting laws, regulations and policy. Ms. Madsen has over
20 years experience in Government contracting law. She has
served as Chair of the ABA section of public contract law and
was also President of the Board of Contract Appeals, Bar
Association. Our second witness, Mr. Scott Amey, serves as
general counsel for the Project on Government Oversight.
Founded in 1981, POGO investigates and exposes corruption and
other misconduct in order to achieve a more accountable Federal
Government. Through its 27-year history, POGO has created a
niche investigating, exposing and helping to remedy waste,
fraud and abuse in Government spending.
Our third witness, Mr. Mark Pearl is president and chief
executive officer of homeland security and defense business
council. Mr. Pearl previously served as a principal chairman of
IT Policy Solutions, which he founded in 2003, and has recently
been serving as executive director of the Consumer Electronics
Retailers Coalition. His focus is public policy and Government
relations expertise on technology and cyber security policy for
more than a dozen years. Mr. Pearl's clients have included a
wide range of Fortune 100 companies and CEO lead associations
in all critical economic and infrastructure sectors. Prior to
forming ITPS, Mr. Pearl was a partner and led the E-commerce
policy practice group in the international law firm, Shaw,
Piven, LLP. Without objection, the witnesses' full statements
will be inserted into the record. I now ask each witness to
summarize his or her testimony for 5 minutes beginning with Ms.
Madsen.
STATEMENT OF MARCIA G. MADSEN, CHAIR, ACQUISITION ADVISORY
PANEL
Ms. Madsen. Good afternoon, Chairman Carney, Congressman
Rogers. Chairman Carney, I may take a small personal privilege
and tell you that I worked for one of your predecessors more
than 20 years and ago and I have a very soft spot in my heart
for the 10th district of Pennsylvania, while I was in law
school. I am here in my capacity today as chair of the
Acquisition Advisory Panel, which was a group I was honored to
chair today having finished that work. I am a lawyer in private
practice. So I am kind of wearing 2 hats I Congress.[?] I am
very pleased to be here today to talk about the panel's
findings and recommendations. I think the Members of the
committee and subcommittee have a copy of the panel's report.
After almost 2 years of work, our report was published in
July 2007 and many of those recommendations and made their way
into law in last year's defense authorization bill or they are
the subject actually of pending legislation, including the
Lieberman-Collin's amendment to this year's bill. They are also
the subject of several regulatory initiatives by the FAR
council and OFPP. I think I have got about now 4 minutes to
summarize our report which given the 89 recommendations and
100+ findings might be a small challenge. But I will try give
you at least a quick overview.
Acquisition reform in the mid-1990's emphasized
streamlining the procurement process and relying more on
commercial items and services and processes and a substantially
reduced acquisition work force. The Packard Commission, which
was in 1986, the 800 Panel in 1993, had emphasized the
Government's needs to attract technology and expertise in the
private sector, and the national performance review in 1993
pushed these changes which were enacted in the mid-1990's. Our
panel was asked to look at many of these issues 10 years later
and what we discovered was a complex landscape that had some
unintended consequences, including the huge growth in
procurement spending as a result of the war on terror and the
Gulf Coast hurricanes in 2005.
Just to give you one statistic from our report which is
loaded with them, between fiscal year 2000 and 2005, Government
purchasing increased 75 percent from $219 billion to more than
$380 billion. Our report uses fiscal year 2004 statistics. That
was the latest data we could get out of the acquisition,
Federal procurement database. There was also a diminished work
force. Just to give you an example, in the mid-1990's, the
DOD's acquisition work force was cut by more than 50 percent.
So we have spending going this way and work force in the 1990's
going down, but flat--flat in the--after the turn of the
century.
As to the use of commercial practices, the evidence that
our panel found was that the Government's practices,
particularly for the acquisition of services by 2005 and 2006
did not approach the rigor of the commercial marketplace
ironically enough with respect to requirement, development, the
use of competition, the use of fixed-price performance-based
contracts. With respect to commercial practices, the panel
learned from commercial buyers of technology and related
services that the keys to success were early investment and
requirements definition and competition. We were able to
determine that in 2004, one third of the Government's
procurement dollars were awarded noncompetitively and even when
competed, the percent of dollars that were awarded when only
one offer was received had more than doubled from 9 percent in
2000 to 20 percent in 2005.
We also believe that the amount of competition was likely
understated--or the amount of noncompetitive orders was
understated--because of the use of orders under multiple award
contracts and we could not get data on the competitiveness of
orders under multiple award interagency contracts for large
IDIQs. So that wasn't available to us. In fiscal year 2004,
about $142 billion of the total procurement spend of $338
billion or 40 percent went through these interagency vehicles
for which we could not get data on the competitiveness of the
ordering process. We made a number of recommendations to
improve competition that are set forth in the report, and I am
happy to answer questions about those later.
We also made recommendations to improve the interagency
contracting process, including looking at whether all of those
contracts are necessary and OFPP has work underway in that
regard. With respect to the Federal acquisition work force, our
panel determined that there was a significant mismatch between
the demands placed on the acquisition work force and the
personnel and skills that were available to meet those demands.
But we realized that there was not reliable information about
the size, composition and competencies of the Federal
acquisition work force or the role of contractors in supporting
that work force. Obviously one cannot understand trends without
data. So we made a number of recommendations, starting with
getting an accurate definition of the work force and data and
human capital planning and I just want to note and I am happy
to provide the committee with a copy of this. But we
commissioned our own work force study. We could not get
accurate data on the Federal acquisition work force. So we
commissioned our own study. This is the executive summary of
that study. We went back to the 1960's, we looked at every
study of the acquisition work force and all of the data that
had been collected; it is on 9 CDs. You are welcome to have it.
I would be happy to answer more questions later, but we would
be happy to provide you with this.
[The statement of Ms. Madsen follows:]
Prepared Statement of Marcia G. Madsen
September 17, 2008
Mr. Chairman, Congressman Rogers and Members of the subcommittee, I
appreciate the opportunity to appear before you to address the
Acquisition Advisory Panel's findings and recommendations. In addition
to chairing this panel, I am a partner in the law firm of Mayer Brown
LLP and I have more than 20 years of experience in Government
procurement law.
You asked me to testify regarding the panel's findings and
recommendations, particularly with respect to best practices. I thought
it would be helpful to provide an overview of the recommendations made
by the Acquisition Advisory Panel and the progress toward
implementation of the recommendations. My testimony could not possibly
cover the panel's 100 findings and 89 recommendations in their
entirety. However, I will try to provide a good overview regarding
competition and adoption of commercial practices, the management and
use of interagency contracts, acquisition work force challenges,
opportunities for small businesses, and the appropriate role of
contractors supporting the Government--the ``blended work force''
issues. I also will talk briefly about the panel's data
recommendations.
The Panel Report was published in draft form in January 2007 and
was published in final form by GPO in July 2007. Since that time, many
of the panel's recommendations have been enacted or are included in
proposed legislation originating both in the House and the Senate.
Several recommendations addressing competition under multiple award
contracts and the acquisition work force were included in the National
Defense Authorization Act for Fiscal Year 2008 (the 2008 DoD
Authorization Act). Finally, as noted in the Government Accountability
Office's (GAO's) December 2007 Report ``Oversight Plan Needed to Help
Implement Acquisition Advisory Recommendations,'' the Office of Federal
Procurement Policy (OFPP) agrees with almost all the panel's
recommendations and has moved forward to implement many of them through
changes in policy and regulation. DoD also has moved separately to
implement several panel recommendations.
The panel was established pursuant to Section 1423 of the National
Defense Authorization Act For Fiscal Year 2004. Its members, balanced
between the public and private sectors, were appointed in February
2005. The panel held 31 public meetings and heard the testimony of 108
witnesses representing 86 entities or groups from industry, Government,
and public interest organizations. The panel's public deliberations
produced approximately 7,500 pages of transcript. In addition, we
received written public statements from over 50 sources, including
associations, individual companies, and members of the public.
I again would like to personally thank the 13 panel members for
their dedication over the course of our deliberations. Each of them was
a volunteer with a full-time and highly responsible position in
``regular'' life. The panel conducted its work under significant
constraints with respect to staff and money. We had only one full-time
staff member, the Executive Director. We are grateful to GSA and to the
Director of Defense Acquisition and Policy for making staff available
on a temporary basis to the panel. The level of participation by the
members in the hearings, in developing findings and recommendations,
and in writing the report was substantial.
The panel is grateful to the many witnesses and members of the
public who helped shape the panel's report through their active
participation and interaction with the panel. (There is a complete list
of the witnesses in the appendices to the report.) The insight gained
from the exchange with witnesses was invaluable. In many instances,
approaches under consideration by the panel were revised or adjusted
based on input from the witnesses who helped the panel see many
different perspectives.
To summarize, significant observations from the panel's work:
Requirements Definition and Acquisition Planning Enhance Competition
Commercial buyers invest heavily in planning and
requirements analysis to obtain meaningful competition.
Government practice focuses on rapid awards at the expense
of planning, competition and performance.
The Government must invest time and resources to enhance its
ability to develop/maintain market expertise and define
requirements.
Competition Drives Innovation and Fair and Reasonable Prices
Commercial practice relies on competition for innovation and
pricing.
Government practice does not meet the standard commercial
practice for competition.
Interagency Contracting:
Incentives to compete lacking.
Improve the ordering process competition and
transparency of data.
Increased Accountability and Transparency Will Improve Interagency
Contracting
No consistent, Government-wide policy for agencies who
manage or use interagency contracts.
Accountability and transparency lacking in interagency
contracting.
Recommendations to require formal business cases to support
interagency contracts, greater accountability in their
management, and more transparent use.
Multiple Award Contracts Need to Provide More Opportunities for Small
Businesses
Agencies should be authorized to reserve awards to small
businesses in full and open competition multiple award
procurements not suitable exclusively to small businesses.
Ordering procedures under multiple award contracts,
including Federal Supply Schedules, should provide agencies
with explicit discretion to limit competition for orders to
small businesses.
The Acquisition Workforce Requires Immediate Attention
Demands on the acquisition work force have outstripped its
capacity.
An expedited assessment of the work force is needed in order
to improve capacity.
Human capital planning and investment in the acquisition
work force are imperative.
Appropriate Role of Contractors Supporting the Workforce
Management challenges of a ``blended'' work force.
Blurring the distinctions between inherently governmental
and commercial functions.
Rising concerns about:
Organizational and personal conflicts of interest;
Protection of contractor proprietary/confidential data.
Recommendations to promote ethical/efficient use of
``blended'' work force.
ENHANCE COMPETITION BY INVESTING IN REQUIREMENTS DEFINITION AND
PLANNING
If there is one fundamental lesson to be learned from the panel's
review of commercial practices, it is the critical role that
requirements development plays in the successful acquisition of
commercial services. Sound requirements development is the key to
improving contractor performance and saving taxpayer dollars. Sound
requirements development increases competition, reduces costs,
eliminates time-and-materials contracts, and increases the likelihood
of successful contract performance. Commercial buyers do it well.
Government buyers need to improve. Today, Government spends more on
services than on major weapons systems. That fact has significant
implications for acquisition. As reflected in the panel's findings and
recommendations, there are aspects in which the acquisition of services
is different--or requires different skills and emphasis. Some of these
aspects include the fact that technology-related services are sold in
the private sector involving a wide variety of skills. Private sector
buyers focus on bringing the right mix of skills together for a project
and on the price of that project. The Government, tends to buy services
on an hourly basis without adequate emphasis on the objection.
Commercial Practice.--Meaningful competition, pricing, contract
type, and terms and conditions all are dependent on the time and effort
commercial firms invest in the preliminary requirements development
stage. Commercial buyers see acquisition of services as major
transactions that can improve an organization's performance and reduce
its costs. The commercial buyers described a rigorous requirements
definition and acquisition planning process. To them, requirements
definition is of equal importance to the selection of the right
contractor. These companies invest the time and resources necessary to
clearly define requirements up-front in order to achieve the benefits
of competition. They perform on-going rigorous market research and are
thus able to provide well-defined, performance-based requirements
conducive to innovative fixed-price solutions. They obtain a commitment
on their requirements from all appropriate levels in the corporation.
Government Practice.--The panel's work shows that the Government
fails to invest in this phase of procurement, focusing instead on rapid
awards. While at the conceptual level buyers appear to understand the
importance of requirements definition to successful, cost-effective
contracts, culture and the metrics focus on ``getting to award'' rather
than contract results. In testimony, public sector officials and
representatives of Government contractors expressed frustration that
the Government is frequently unable to define its requirements
sufficiently to allow for fixed-price solutions, head-to-head
competition, or performance-based contracts.
Ill-defined requirements fail to produce meaningful competition for
services solutions. Instead, agencies often rely on time-and-materials
contracts with fixed hourly rates that lack incentives for innovative
solutions. The testimony was consistent that the major contributors to
this problem are the cultural and budgetary pressures to quickly award
contracts or orders, combined with a lack of market expertise in an
already strained acquisition work force. The Government's lack of
investment in acquisition planning is well-documented beyond the
testimony heard by the panel. For instance, two audit reports from the
Department of Defense Inspector General (DoD IG) that were reviewed by
the panel found that of the $217 million spent under 117 awards
reviewed, 116 lacked acquisition planning or market research.\1\
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\1\ DoD IG Report No. D-2007-007, ``FY 2005 Purchases Made Through
the General Services Administration,'' Oct. 30, 2006, at 1-4 (general
discussion of the issue); DoD IG Report No. D-2007-032, ``Report on
Fiscal Year 2005 DoD Purchases Made Through the Department of
Treasury,'' Dec. 8, 2006, at 32 (specific statistics cited).
---------------------------------------------------------------------------
Recommendations: The panel recommendations are based on current
commercial sector practices. For instance, to develop and maintain
market expertise, the panel recommended that agencies establish
``centers of expertise'' to protect their high-dollar investments in
recurring or strategic requirements. The panel also saw a need for a
central source of market research information comparable to that
maintained by private companies. We recommended that the General
Services Administration (GSA) establish such a capability to monitor
services acquisitions by Government and commercial buyers, collect
information on private sector transactions that is publicly available,
as well as obtain information on Government transactions, and make this
information available Government-wide. Under our recommendations for
improving Performance-Based Acquisition (PBA), the panel recommended
that OFPP provide more guidance to agencies regarding how to define
requirements in terms of desired outcomes, how to measure those
outcomes, and how to develop appropriate incentives for contractors to
achieve those outcomes. Because defining needs/requirements up-front is
one of the most critical aspects of a PBA, the panel recommended that
the FAR require the Government to develop and provide to contractors a
``baseline performance case.'' The panel's report contains details
about what this baseline performance case would entail, but it is
essentially a framework to provide discipline in the Government's
requirements definition process. We also recommended an educational
certification program for contracting officer representatives to help
them become effective planners and monitors of PBAs. With respect to
the concerns expressed by the GAO and Inspectors General (IGs)
regarding ill-defined requirements for orders under interagency
contracts, the panel recommended criteria for requirements planning by
ordering agencies before access to an interagency contract is granted.
OFPP has begun to implement these recommendations--for example, OFPP
has tasked GSA to implement the panel's recommendation regarding market
research.
ENCOURAGE COMPETITION TO INCREASE INNOVATION AND PRODUCE FAIR AND
REASONABLE PRICES
Commercial Practice: In addition to learning that basic commercial
practice involves substantial investment in requirements analysis, the
panel also was advised that commercial buyers rely extensively on
competition to produce innovation and fair and reasonable prices. In
fact, competition is fundamental to producing innovation and to
determining fair and reasonable prices. Because there is no substitute
for competition, commercial companies rarely buy on a sole-source
basis. In those rare cases where they do not seek or cannot achieve
competition, commercial buyers rely on their own market research,
benchmarking, and often seek data on similar commercial sales to
establish fair and reasonable pricing. In some cases, they may even
obtain certain cost-related data, such as wages or subcontract costs,
from the seller to determine a price range. But commercial buyers
generally find these methods far inferior to competition for arriving
at the best price. As a result, they monitor non-competitive contracts
closely, and eliminate such arrangements as soon as the requirement can
be moved to a competitive solution.
Government Practice: It is instructive to compare the strong
commercial preference for competition to the Government's competition
statistics. In fiscal year 2004, the Government awarded $107 billion,
or over one-third of its total procurement dollars, non-competitively.
Over one-fourth, or $100 billion, was awarded non-competitively in
2005.\2\ The number of competitions that result in the Government only
receiving one offer doubled between 2000 and 2005. Spending on services
in both 2004 and 2005 accounted for 60 percent of procurement dollars
with 20 percent and 24 percent awarded without competition,
respectively.\3\
---------------------------------------------------------------------------
\2\ Standard Competition Report from FPDS-NG, available on-line at
https://www.fpds.gov under Standard Reports (last visited Jan. 29,
2007). The competitive/non-competitive base (against which the
percentage is derived) is $338 billion for fiscal year 2004 and $371.7
billion for fiscal year 2005.
\3\ FPDS-NG special reports for the panel.
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Interagency Contracting.--The panel believes the amount of non-
competitive awards may, in fact, be underreported for orders under
multiple award contracts available for interagency use, generally known
as ``interagency contracts.'' The panel's repeated attempts over
several months to obtain information about the extent of competition
for orders under these types of contracts were frustrated. The
Government's database on Federal procurement spending, the Federal
Procurement Data System--Next Generation (FPDS-NG) only began to
collect data on interagency contracts in 2004. Due to a number of
factors, including poor reporting instructions, faulty validations, and
even DoD policy, the ``extent competed'' field in FPDS-NG for these
orders overwhelmingly reflects the competitive nature of the master
contract, rather than the actual level of competition for orders. This
reporting problem skews the data such that it is unreliable. The lack
of transparency into the nature of these orders is a significant
weakness. FPDS-NG reports spending under contracts available for multi-
agency use at as much as $142 billion, or 40 percent of procurement
spending, in fiscal year 2004.\4\
---------------------------------------------------------------------------
\4\ Id.
---------------------------------------------------------------------------
Despite the panel's overarching concern with data reliability and
transparency, there certainly appears to be sufficient cause for
concern in addition to these statistics. The panel was well aware that
GAO put management of interagency contracting on its High Risk Series
in 2005. Since the GAO high risk designation in 2005, more data
regarding orders under these contracts has become available. In fact,
in an audit report reviewed by the panel, the DoD IG found that 62
percent of reviewed orders, totaling nearly $50 million, failed to
provide a fair opportunity to compete as required by law. In addition,
98 of 111 orders valued at $85.9 million were either improperly
executed, improperly funded, or both.\5\
---------------------------------------------------------------------------
\5\ DoD IG Report No. D-2007-023, ``FY 2005 Purchases Made Through
the National Aeronautics and Space Administration,'' Nov. 13, 2006, at
ii.
---------------------------------------------------------------------------
The Panel's Report sets forth the history and efforts by Congress
to improve competition. The intent of interagency contracts, most of
which are assumed to be multiple award contracts, was to lower
administrative costs, leverage buying power and provide a streamlined
acquisition process--all well-meaning goals. Such contract vehicles
were never intended to be used to avoid competition.
Interagency contracts generally are indefinite-delivery/indefinite-
quantity type contracts with very broad scopes of work, most of which
provide for multiple awardees that will compete with one another for
specific orders at a later point when an agency identifies a
requirement. Therefore, where services are concerned, the initial
competition is based on loosely defined statements of the functional
requirements resulting in proposals for hourly rates for various labor
categories. The expectation is that once an agency identifies a
specific need, a more clearly defined requirement will be provided at
the order level allowing the multiple awardees to submit task-specific
solutions and pricing. Because this process narrows the number of
eligible contractors at the order level, Congress has insisted that
these multiple awardees be given a ``fair opportunity'' to compete for
the task orders.
So why do interagency contracts seem to draw so much non-
competitive activity? There appear to be a number of checks and
balances missing that would otherwise contribute to healthier
incentives for competition.
Incentives to Compete Lacking.--The panel found that there was no
Government-wide requirement that all interagency contracts provide
notification that a task order is available for competition. There was
no visibility into sole-source orders, as there was no requirement for
a synopsis or public notification for orders under multiple award
contracts, regardless of the size of the order. Even where a best value
selection is made at the order level, there was no requirement for a
detailed debriefing, regardless of the amount of the order or the
amount of bid and proposal costs expended by the eligible contractor,
thus denying the contractor information that might enable it to be more
competitive on future orders/contracts. Further, without regard to size
of the order, there was no option for contractors to protest the
selection process under multiple award contracts, reducing the pressure
on the Government to clearly define requirements, specify its
evaluation criteria, and make reasonable trade-off decisions among
those criteria. For example, even issues that affect the integrity of
the competitive process such as organizational or personal conflicts of
interest could not be protested.
However, the panel also took testimony from agency officials who
told us they could not meet their missions without the use of
interagency contracts. Therefore, the panel sought to achieve a balance
in its recommendations that would introduce incentives to encourage
more competition while not unduly burdening these tools for streamlined
buying. For instance, some of our recommendations only apply to orders
over $5 million. Why this threshold? We found that of the $142 billion
spent on orders under these interagency contracts in fiscal year 2004,
$66.7 billion, nearly half, was awarded in single transactions (at the
order level) exceeding $5 million. The fiscal year 2005 statistics show
total spending on these contracts at $132 billion with $63.7 billion in
single transactions over $5 million.\6\
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\6\ FPDS-NG special reports for the panel.
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Nearly half of the dollars are spent on single transactions over
this threshold, but the majority of transactions are actually below it.
By using this threshold, we were able to impact a significant dollar
volume, but not the majority of transactions. ``Bite-sized'' orders for
repetitive needs can be placed using the current methods under this
threshold, while large transactions involving the need for requirements
in a Statement of Work, evaluation criteria, and best value selection
procedures would be subject to a higher level of competitive rigor.
Recommendations: The panel recommended expanding Government-wide
the current DoD Section 803 requirements that include notifying all
eligible contractors under multiple award contracts of order
opportunities. We also recommended that the 803 procedures apply to
supplies and services. And while we agreed that a pre-award
notification of sole-source orders might unduly burden the ordering
process, the panel recommended post-award public notification of sole-
source orders finding that it would improve transparency. For single
orders exceeding $5 million, the panel recommended that agencies adhere
to a higher competitive standard by: (1) Providing a clear statement of
requirements; (2) disclosing the significant evaluation factors and
subfactors and their relative importance; (3) providing a reasonable
response time for proposal submissions; and (4) documenting the award
decision and the tradeoff of price/cost to quality in best value
awards. We also recommended post-award debriefings for disappointed
offerors for orders over $5 million when statements of work and
evaluation criteria are used. Concerned that the Government is buying
complex, high-dollar services without a commensurate level of
competitive rigor, transparency, or review, we recommended limiting the
statutory restriction on protests of orders under multiple award
contracts to orders valued at $5 million or less. Of course, it should
be noted that under existing law, any order under the GSA Schedules may
be protested.
Specific to the GSA Federal Supply Schedules program, the panel
recommended a new services schedule for information technology that
would require competition at the task order level and reduce the burden
on contractors to negotiate up-front hourly labor rates with GSA. The
panel sees the exercise of negotiating (and auditing) labor rates as
producing little in the way of meaningful competition given that
solutions are project-specific and the price depends on the actual
labor mix applied. In such cases, analyzing labor rates contributes
little to understanding the price that the Government will pay for the
project. Much time and effort are wasted by GSA and contractors in
providing and auditing labor rates that do not provide useful
information about the costs of a project.
The 2008 DoD Authorization Act adopted the panel's recommendations
requiring enhanced competition requirements and post-award debriefings
for task orders exceeding $5 million. The 2008 DoD Authorization Act
also authorized bid protests for task orders exceeding $10 million (the
panel had recommended a $5 million threshold). In addition, S. 680 and
other measures currently under consideration in connection with the
fiscal year 2009 DoD Authorization Bill would extend the Section 803
ordering procedures for the Federal Supply Schedules, Government-wide.
At the same time OFPP has opened FAR Cases implementing several of the
panel competition recommendations.
ACCOUNTABILITY AND TRANSPARENCY INADEQUATE FOR INTERAGENCY CONTRACTING
The panel also separately addressed the issues of management of,
accountability for, and transparency of interagency contracts. We
included in our review the practice of using assisting entities that
buy from interagency contracts. The panel found that while some
competition among interagency contracts is desirable, there is no
coordination regarding the creation or continuation of these contract
vehicles to determine whether their use is effective in leveraging the
Government's buying power or whether they have proliferated to the
point of burdening the acquisition system. The panel also was concerned
that recent focus on the problems of interagency contracting would
result in an increase of so-called ``enterprise-wide contracts.'' Such
contracts are operationally the same as interagency contracts, except
they are restricted for use by one agency. The panel found the trend
toward such contracts to result in costly duplication if the existing
problems with interagency contracts can be addressed through better
management discipline and a more transparent competitive process.
Recommendations: Specifically, the panel found that the lack of
Government-wide policy regarding the management of interagency
contracts is a key weakness that can be addressed by OFPP. OFPP is well
along in the development of just such a policy. (As the panel was
developing its findings and recommendations in this area, panel members
met with OFPP to provide input regarding the panel's work.) The panel
also recommended that agencies, under policy guidance issued by OFPP,
formally approve the creation, continuation, or expansion of
interagency contracts using a formal business case. Agencies managing
these contracts would, among other things, be required to identify and
apply the appropriate resources to manage the contract, clearly
identify the roles and responsibilities of the participants, and
measure sound contracting procedures. As discussed above, there is
little visibility into the numbers and use of interagency contracts.
The data must be derived from FPDS-NG and is not, as discussed earlier,
completely reliable. Therefore, the panel made a number of
recommendations to improve the transparency and reliability of data on
interagency contracts.
S. 680 includes panel recommendations regarding management of
interagency contracts. At the same time, OFPP is working toward
implementing management policies and procedures for the creation,
continuation and operation of interagency contracts.
PROVIDING OPPORTUNITIES FOR SMALL BUSINESSES UNDER MULTIPLE AWARD
CONTRACTS
Although not included in the topics specified in Section 1423 of
SARA, the panel decided early on that because its recommendations
likely would impact small businesses it needed to include an
examination of small business issues in its work. The growth in
multiple award contracts has created particular challenges for small
businesses. The panel recognized the positive efficiencies of multiple
award contracts, especially those available for multi-agency use.
However, the goal of efficiency must be balanced against the negative
impact these contracts can have on small business opportunities. The
panel found that multiple award contracts often have a broad scope of
work, geographically, functionally, or both, and that these broad
scopes of work make it extremely difficult for small businesses
competing against large businesses under full and open competition for
multiple awards. Further, when small businesses do receive awards under
multiple award contracts, there is no specific statutory or regulatory
authority for agencies to reserve orders under multiple award contracts
for small business competition to achieve agency small business goals.
Recommendations: The panel recommended specific statutory
amendments that would allow contracting officers to reserve, for small
business competition only, a portion of the multiple awards in a full
and open competition not suitable for a total small business set-aside.
The panel also recommended express statutory or regulatory authority to
reserve orders, at the explicit discretion of the ordering agency,
under multiple award contracts for competition among the small business
multiple awardees only. These authorities will provide contracting
officers with greater flexibilities in using multiple award contracts
to meet agency small business goals. To date, there has been little
movement in addressing these recommendations.
The panel considered mandatory reserves or set-asides of orders but
instead recommended providing agencies with the discretion to reserve
orders in order to meet small business goals. Agency discretion is
consistent with the flexibility and inherent efficiency of multiple
award contracts. That discretion, when combined with the flexibility of
multiple award contracts can create an effective tool for creating
opportunities for small business. For example, the panel considered the
record of the Federal Supply Schedule program, which has been one of
the most successful contracting programs for small businesses programs,
with small businesses receiving over 36 percent of the dollar value of
orders over the last 5 years. The Federal Supply Schedule does not have
mandatory set-asides for orders. However, under the Federal Supply
Schedule, agencies do have the discretion to consider socio-economic
status during the ordering process.
A related issue is contract bundling. The panel found inconsistent
implementation of contract bundling requirements across the Government.
The panel recommended additional training and the creation of an
interagency group to develop best practices and strategies to unbundle
contracts and mitigate the effects of contract bundling. S. 2300 adopts
this recommendation requiring a report on best practices to reduce
bundling, followed by the issuance of additional policies to reduce
bundling.
THE ACQUISITION WORKFORCE REQUIRES IMMEDIATE ATTENTION
The panel determined that a quantitatively and qualitatively
adequate work force is essential to the successful operation of the
acquisition system. But the demands on the acquisition work force have
outstripped its capacity. Just since 9/11, the dollar volume of
procurement has increased by 63 percent. While the current work force
has remained stable since 2000, there were substantial reductions in
the 1990's accompanied by relatively little new hiring. Compounding the
problem, while a variety of simplified acquisition techniques were
introduced by the 1990's acquisition reforms for low dollar value
procurements, higher dollar procurements require greater sophistication
by the Government buyer due to the growth in best value procurement,
the emphasis on past performance, and the use of commercial
contracting. Accompanying these trends is the structural change in what
the Government is purchasing, with an emphasis on high dollar, complex
technology-related solutions. However, due to the lack of a consistent
definition of the work force and lack of ability to measure the work
force, as well as the lack of competency assessments and systematic
human capital strategic planning, determining the needs of this work
force is difficult. The panel was very frustrated by the lack of useful
and meaningful data regarding the Federal acquisition work force and
undertook its own study--dating back to the 1960's in an effort to
obtain information on the size, composition and skills of the work
force.
The panel was struck by the difference from commercial practice.
Private sector buyers of services invest in extremely well-qualified
employees and consultants to define their requirements, design, and
carry out their acquisition of services. Larger acquisitions--$10
million and up--are subject to a tightly controlled and carefully
structured process overseen by highly credentialed and experienced
buyers.
Recommendations: An accurate understanding of the key trends about
the size and composition of the Federal acquisition work force cannot
be obtained without using a consistent benchmark. The panel recommended
that OFPP prescribe a consistent definition and methodology for
measuring the work force. The urgency of this task is reflected in
another recommendation that OFPP collect data using this definition and
measuring methodology within 1 year of the panel's final report.
Consistent with this, OFPP should be responsible for creating and
maintaining a mandatory Government-wide database for members of this
work force. The panel noted that the Commission on Government
Procurement recommended just such a system over 30 years ago--in 1972.
While there are a great many recommendations for work force improvement
in the panel's report, one of the key recommendations is that each
agency must engage in systematic assessment and human capital strategic
planning for its acquisition work force. Without such plans, it is
impossible to know how and to what extent a given agency's work force
is deficient. It is also difficult to know to what extent and how
efficiently agencies are using contractors to support the acquisition
function. In support of these recommendations, the panel has also
suggested that these plans be reviewed by OFPP for trends, best
practices, and shortcomings as part of an agency's overall human
capital planning requirements. Finally, the panel recommended an SES-
level position be established within OFPP responsible for acquisition
work force programs, a Government-wide intern program, as well as the
reauthorization of the SARA training fund. I am pleased to note that
the 2008 DoD Authorization Act included a number of these
recommendations that are now law. Most importantly, the 2008 DoD
Authorization Act requires the Chief Acquisition Officers for each
agency, in coordination with OFPP, to develop human capital succession
plans for the acquisition work force. DoD completed a comprehensive
assessment of its acquisition work force in June 2007, an assessment
that is being used to develop a strategic human capital plan for its
acquisition work force.
OFPP also recently conducted a Government-wide competency survey
assessing the skills of the civilian acquisition work force. OFPP
received over 5,400 responses to the survey, approximately half the
civilian acquisition work force. OFPP has communicated the results of
the survey to the respective agency Chief Acquisition Officers for
human capital strategic planning purposes and closing skill gaps. OFPP
currently has another survey under way. Two important steps have been
taken to invest in the future of the acquisition work force. The 2008
DoD Authorization Act created the Defense Acquisition Workforce
Development Fund for the recruitment, training, and retention of
acquisition personnel. The 2008 DoD Authorization Act also made
permanent the Acquisition Workforce Training Fund managed by OFPP and
GSA. The Acquisition Workforce Training Fund supports Government-wide
training of the acquisition work force through the Federal Acquisition
Institute.
APPROPRIATE ROLE OF CONTRACTORS SUPPORTING THE WORKFORCE
Management challenges of a ``blended'' work force: The panel heard
testimony regarding the use of and management of the ``blended'' work
force, where contractors work side-by-side with Government employees,
often performing the same or similar functions.
Blurring the Distinctions.--During the 1990's, the Federal
acquisition work force was reduced substantially. For example, DoD's
acquisition work force was reduced by nearly 50 percent during that
time. The structural changes in what and how much the Government is
buying since 9/11 have left agencies with no alternative to using
contractors to deal with the pressures of meeting mission needs and
staying within hiring ceilings. Agencies have contracted for this
capability and contractors are increasingly performing the functions
previously performed by Federal employees. To a significant degree,
this has occurred outside of the discipline of OMB Circular A-76, with
the result that there is no clear and consistent Government-wide
information about the number of people and the functions performed by
this growing cadre of service providers.
While the A-76 outsourcing process provides a certain discipline in
distinguishing between ``inherently governmental'' and commercial
functions, it is less clear if and how agencies apply these concepts to
the blended or multi-sector work force that has arisen outside of the
A-76 process. The challenge is determining when the Government's
reliance on contractor support impacts the decisionmaking process such
that the integrity of that process may be questionable. A second
challenge that arises is how the Government effectively manages a
blended work force given the prohibition on personal services.
Rising Concerns.--The panel identified the increased potential for
conflicts of interest, both organizational and personal, as a
significant challenge that arises from the blended work force and from
the consolidation in many sectors of the contractor community.
Alongside this issue is the need to protect contractor proprietary and
confidential data in such an environment when a contractor supporting
one agency in a procurement function may be competing against other
contractors for work that is in the subject area of its support
contract at another agency.
Recommendations: The panel recommended that OFPP update the
principles for agencies to apply in determining which functions must be
performed by Federal employees, so that agencies understand that such
principles apply even outside the A-76 process. Agencies need to
identify and retain core functional capabilities that allow them to
properly perform their missions and provide adequate oversight of
agency functions performed by contractors. Agencies must ensure that
the functions identified as those which must be performed by Government
employees are adequately staffed with Federal employees.
The panel did not see a need for new statutes. Instead, it viewed
the issues as contract-specific and suggested that the better approach
would be policy guidance and new solicitation and contract clauses.
Therefore, the panel recommended that in its unique role as developer
of Government-wide acquisition regulations, the FAR Council review
existing conflict of interest rules and regulations, and to the extent
necessary, create new, uniform, Government-wide policy and clauses
regarding conflicts of interest, as well as clauses protecting
contractor proprietary and confidential data. In particular, the rules
regarding organizational conflicts of interest need to be updated to
address situations involving impaired objectivity. The panel also
recommended that the FAR Council work with the Defense Acquisition
University and the Federal Acquisition Institute to devise improved
training for contracting officers to assist in identifying and
addressing potential conflicts and to develop better tools for the
protection of contractor proprietary and confidential data. OFPP and
the FAR council have opened several FAR cases to provide additional
guidance regarding organizational and personal conflicts of interest,
the protection of contractor proprietary and confidential data, as well
as new training on the identification and resolution of conflicts of
interest. Pending legislation also addresses these issues.
CONCLUSION
Mr. Chairman, Congressman Rogers, and Members of the subcommittee,
thank you for your interest in the panel's efforts. We are available to
provide any additional information or assistance that the committee or
the staff may need.
This concludes my prepared remarks. I am happy to answer any
questions you might have.
Mr. Carney. Thank you, I think.
Mr. Amey, for 5 minutes please.
STATEMENT OF SCOTT AMEY, GENERAL COUNSEL, PROJECT ON GOVERNMENT
OVERSIGHT
Mr. Amey. Yes. Good afternoon, Chairman Carney, Ranking
Member Rogers and Members of the subcommittee. Thank you for
inviting me to testify about the state of DHS contracting. I am
Scott Amey, general counsel of the Project on Government
Oversight, a nonpartisan public interest group. Over the years,
particularly in the 1990's, many acquisition forms were
implemented. The problems created by the reforms became starkly
apparent after the beginning of the war on terror and after
Hurricane Katrina. Those have shown that contracting decisions
were placing taxpayer dollars at risk and sometimes lives at
risk as well.
Last week we were in a meeting with the DHS insider and we
were all reminded of the build-up in the Defense Department in
the 1980's and many of the contracting snafus that occurred. My
fear is that DHS is repeating some of the same mistakes, poor
planning, poor contract administration and oversight and the
result will be the same. Lost taxpayer dollars. If the problems
with DHS spending are not corrected, POGO believes that the
next management or IT contract will mirror the misspending
characterized by the $436 hammer and the $7,000 coffee pot.
As a point of reference, the Government spends $465 billion
on contracts for goods and services in fiscal year 2007. No-bid
contracts are a rarity in the private sector which was
evidenced in the acquisition advisory panel report have become
commonplace in Government. One-bid offers account for 20
percent of the competed contract spending. Government-wide bid
protests are being sustained at a level of 27 percent, which
indicates that contracting mistakes are being made. DHS
spending has increased from approximately $4 billion in 2003 to
$12 billion in 2007. That is a $3 billion decrease from the
number in 2006, which was well over, I think, $15 billion. DHS
sole-source spending is about 20 percent. I know you guys asked
some questions. USA.gov has pie charts and all those graphics
for you. It is all there now. But that number doesn't include
contract spending that occurs without what we consider genuine
competition.
There are few encouraging trends with DHS contracting. They
are using risky contract vehicles, a little less. They have
also met their 23 percent small business goal. But we--and we
also applaud DHS for its movement to restore accountability and
integrity to the Deepwater program. Nevertheless, POGO has many
concerns. DHS fixed-price contracting is down, which places
taxpayer dollars at risk. Moreover, as this subcommittee has
found, nearly $15 billion has been wasted in 11 DHS programs.
That certainly is the tip of the iceberg for those programs as
well as DHS overall.
This is news and is the kind of a fallout of a full
committee report that was put out last year that had given did
DHS poor grades for emergency planning and procurement. The GAO
and IG confirm those findings documenting problems with DHS's
internal control, financial system, human capital and
contracting systems that must be improved to prevent waste,
fraud, and abuse.
I would like to highlight kind of two contracting problems
that we saw. The first was during Hurricane Katrina, rather
than going to the GSA schedules and buying rent-a-cars or
leasing rent-a-cars through them, they actually set up their
own contracts. Rather than paying about $600 per month off of
the schedules and even less if the contracting officer could
have even drilled down and gotten a better price, GSA set up a
contract for 18 vehicles at $936 per month. I called one of the
vendors on the schedule and asked why they weren't chosen. They
were as confused as I was and said we were willing, ready, and
able to provide GSA with those cars.
More troublesome was a comparison that POGO did after the
first anniversary of Hurricane Katrina. We compared and took a
look at some of the issues that were found after Hurricane
Andrew back in 1992. The GAO report actually had cut and pasted
language from one report to the next. So even though there was
a 13-year difference, we ended up, see, they didn't implement
the lessons learned from one report it another. That is one
reason where you asked earlier is this really just a people
issue, is this an acquisition work force issue? I think there
are more systemic problems here that we need to worry about.
The other problem is GSA--DHS contractors are obviously lining
up to get a piece of this pie.
When they have seen the amount of money explode, go through
the roof. There are seminars right now being given in the
industry on how to get a piece of that pie, how to get around
competition and how to know who contracting officers are to get
the best bang for your buck in the industry. Another case that
we have seen is an SBInet subcontractor employee contacted POGO
and said, ``that his subcontracting employer is the poster
child of Government waste.'' He adds that they are merely
providing bodies to build more contracts and that they are not
spending money, they are told they are not spending money fast
enough.
POGO has also concerns with risky contractors continuing to
get DHS money. We have issues with the revolving door. We are
hearing a number of cases with the revolving door as well as
with outsourcing within DHS that we are very concerned with. In
my written testimony that I provided, we provided, I think, 10
different recommendations from everything from competition to
looking at certain risky contract vehicles. So I ask the
subcommittee to take a look at those. I am more than happy to
answer any other questions that the subcommittee may have.
Thank you.
[The statement of Mr. Amey follows:]
Prepared Statement of Scott Amey
September 17, 2008
Good morning, Chairman Carney, Ranking Member Rogers, and Members
of the subcommittee.
Thank you for inviting me to testify today about the state of
Department of Homeland Security contracting. I am Scott Amey, General
Counsel and Senior Investigator with the Project On Government
Oversight (POGO), a nonpartisan public interest group. Founded in 1981,
POGO investigates and exposes corruption and other misconduct in order
to achieve a more accountable Federal Government.\1\
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\1\ For more information on POGO, please visit www.pogo.org.
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Throughout its 27-year history, POGO has created a niche in
investigating, exposing, and helping to remedy waste, fraud, and abuse
in Government spending. One of POGO's most celebrated investigations
uncovered outrageously overpriced military spare parts such as the
$7,600 coffee maker and the $436 hammer. Since that time, particularly
in the 1990's, many acquisition reforms have been implemented. The
reforms, however, were not all they were cracked up to be. The problems
created by the reforms became starkly apparent after the beginning of
the Afghanistan and Iraq Wars, and after Hurricane Katrina devastated
the Gulf Coast. These events showed that contracting decisions were
placing taxpayer dollars--and sometimes lives--at risk.
The war on terror and the post-hurricane recovery and
reconstruction effort also highlighted how drastically different the
Federal Government's contracting landscape is now from what it was in
past decades. Contracting dollars have increased, oversight has
decreased, the acquisition work force is stretched thin, and spending
on services now outpaces spending on goods. (Because the return on
services is more difficult to quantify than on goods, contracting is
even more vulnerable to waste, fraud, and abuse.) If the problems with
the contracting process are not corrected now, POGO believes the next
consulting, management, or information technology contract will mirror
the misspending characterized by the hammers and coffee makers in the
mid-1980's. We provide the following procurement history and
recommendations as a roadmap to assist Congress in better overseeing
the use of taxpayer dollars.
CONTRACTING PAST
The 1980's witnessed some of the strongest pro-taxpayer contracting
reforms implemented to date. During the decade, the Competition in
Contracting Act (CICA) was passed,\2\ the Cost Accounting Standards
(CAS) Board was reestablished,\3\ the False Claims Act was
strengthened,\4\ and there was a greater emphasis placed on the Truth
in Negotiations Act (TINA).\5\ Those actions increased competition in
contracting, provided uniformity in contractor accounting practices,
prevented fraud, and allowed the Government to review contractor cost
or pricing data to ensure taxpayer dollars were being spent wisely.
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\2\ 10 U.S.C. 2304(a)(1) (applicable to DOD); 41 U.S.C.
253(a)(1) (applicable to other executive agencies); 41 U.S.C. 403(6)
(definition of ``full and open competition'').
\3\ The Board's regulations are codified at 48 CFR, Chapter 99. See
FAR Part 30 (Cost Accounting Standards Administration).
\4\ The False Claims Act (31 U.S.C. 3729-3733) was originally
passed in 1863 at the urging of President Abraham Lincoln, who was
attempting to halt the Civil War profiteering that was crippling the
Union Army. Amendments to the Act in 1986, championed by Senator
Charles Grassley (R-IA), increased the penalties for fraud and
encouraged private citizens to come forward if they were aware of
corporations defrauding the Government.
\5\ 10 U.S.C. 2306a, 41 U.S.C. 254b.
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In the 1990's, the Clinton Administration's effort to reinvent
Government so that it operated more like the private sector and
decrease contracting red-tape succeeded to a point. But acquisition
reform--which was part of reinventing Government--resulted in several
laws that made Government contracts more susceptible to misconduct,
cost more, and get results contractors care about rather than making
the Government ``work better, cost less, and get results Americans care
about.''\6\ Those laws reduced contract oversight, making it difficult
for Government investigators and auditors to find waste, fraud, and
abuse,\7\ and created risky contracting vehicles that often place
public funds at risk.
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\6\ The Clinton-Gore initiative was known as the ``National
Performance Review'' and the ``National Partnership For Reinventing
Government.'' Available at http://govinfo.library.unt.edu/npr/
index.htm.
\7\ The Federal Acquisition Streamlining Act of 1994 (FASA) (Public
Law 103-355), the Federal Acquisition Reform Act of 1996 (FARA) (Public
Law 104-106), and the Services Acquisition Reform Act of 2003 (SARA)
(Public Law 108-136).
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Finally, ``best value contracting''\8\ further swung the pendulum
away from protecting taxpayers and allowed contracts to be steered to
well-connected, influential, and sometimes undeserving contractors.
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\8\ ``Best value'' contracting had been used in certain instances,
but was added to the Federal Acquisition Regulation (FAR) in August
1997. A policy debate continues pitting ``low price'' against ``best
value'' as the preferred method for buying goods and services. Buying
goods and services at the ``lowest practical cost'' would allow for
some buying flexibility and provide a more objective criteria that
would prevent the unjustified steering of contracts to non-responsible,
questionable, or politically connected companies.
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CONTRACTING PRESENT
Simply stated, the contracting landscape has drastically changed in
recent years and the Government must do a better job to ensure that
taxpayer dollars are spent wisely. Federal contract spending has
dramatically increased while Government control, competition, and
oversight has been reduced. This recipe bodes ill for taxpayers, which
is demonstrated by the problems below.
The Big Picture
Contract spending for goods and services has doubled in
recent years, increasing from $219 billion in fiscal year 2000
to over $465 billion in fiscal year 2007.\9\
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\9\ Federal Procurement Data Service--Next Generation, ``Trending
Analysis Report for the Last 5 Years'' and ``List of Agencies
Submitting Data to FPDS-NG,'' as of September 4, 2008. Available at
http://www.fpdsng.com/downloads/top_requests/
FPDSNG5YearViewOnTotals.xls and http://www.fpdsng.com/downloads/
agency_data_submit_list.htm.
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The Federal Government is spending more on services than
goods.\10\
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\10\ Acquisition Advisory Panel, ``Report of the Acquisition
Advisory Panel to the Office of Federal Procurement Policy and the U.S.
Congress,'' December 2006, ``Introduction,'' pp. 2-3. Available at
http://www.acqnet.gov/comp/aap/documents/DraftFinalReport.pdf.
Hereinafter ``1423 Panel Report.''
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No-bid contracts, a rarity in the private sector,\11\ have
become commonplace in the Government. Nearly 40 percent of all
contract spending is awarded without competition.\12\
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\11\ 1423 Panel Report, ``Executive Summary,'' p. 2.
\12\ 1423 Panel, ``Findings and Recommendations on Data,'' August
10, 2006, pp. 3-4. Hereinafter ``1423 Panel Data.'' Available at http:/
/www.acqnet.gov/comp/aap/documents/
Data%20Findings%20and%20Recommendations%20Charts%2008%2010%2006.pdf.
See percentages in USAspending.gov, at http://www.usaspending.gov/fpds/
tables.php?tabtype=t1&rowtype=a&subtype=p&sorttype=2007.
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In addition, one-bid offers account for 20 percent of
``competed'' contract spending.\13\
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\13\ 1423 Panel Data, at p. 7.
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The Government is relying on contractors to execute jobs
once performed by civil servants, including policymaking and
budgetary decisions.\14\ The Federal contracting work force,
depending on the definition that you use, has leveled off since
the mid-1990's.\15\
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\14\ See FAR Subpart 7.503. Available at http://www.arnet.gov/far/
current/html/Subpart percent207_5.htm.#wp1078196.
\15\ 1423 Panel Report, p. 3.
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The vastly expanded definition of ``commercial item'' has
resulted in decreased oversight of and accountability for
contractors because they no longer have to provide certified
cost or pricing data for the ``commercial'' goods or
services.\16\
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\16\ Commercial item contracts have increased from $23 billion in
2005 to nearly $31 billion in 2006. Available at http://www.fpdsng.com/
downloads/FPR_Reports/2005_fpr_section_III_agency_views.pdf (p. 6 of
205) and http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf (p. 6 of 201).
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Interagency contracting continues to increase--GSA schedule
sales totaled $35.1 billion in fiscal year 2006.\17\ Although
interagency contracts provide agencies flexibility to purchase
commonly required goods and services, which can save taxpayers
money, they are also risky and prone to abuse. Monitoring and
oversight have been very poor and competition has been
lacking.\18\
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\17\ GAO Report (GAO-07-310), High-Risk Series: An Update, January
2007, p. 77. Available at http://www.gao.gov/new.items/d07310.pdf.
\18\ Id.
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The Government recovered $2 billion in settlements and
judgments in cases involving allegations of fraud against the
Government in fiscal year 2007 and has recovered more than $20
billion since 1986.\19\
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\19\ DOJ Press Release (07-873), ``Justice Department Recovers $2
Billion for Fraud Against the Government in fiscal year 2007; More Than
$20 Billion Since 1986,'' November, 1, 2007. Available at http://
www.usdoj.gov/opa/pr/2007/November/07_civ_873.htm.
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Bid protest sustain rates (when GAO agrees that a contract
was awarded improperly) are 27 percent,\20\ which illustrates
that flawed contract award decisions both honest and egregious
are being made at a troubling rate.
---------------------------------------------------------------------------
\20\ GAO Report (GAO-08-247R), Letter to The Honorable Nancy Pelosi
Speaker of the House of Representatives, December 10, 2007, p. 2.
Available at http://www.gao.gov/special.pubs/bidpro07.pdf.
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Homeland Security
DHS contract spending has increased from $3.4 billion in
fiscal year 2003 to $12.2 billion in fiscal year 2007.\21\ DHS
spent $11 billion on contracts in fiscal year 2008 thus
far.\22\
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\21\ FPDS-ND, ``List of Agencies Submitting Data to FPDS-NG,'' as
of September 4, 2008. Available at http://www.fpdsng.com/downloads/
agency_data_submit_list.htm.
\22\ Id.
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The use of sole source contracts decreased from
approximately 40 percent in fiscal year 2006 to 20 percent in
fiscal year 2007.\23\ Sole source contracts might decrease
again in 2008 currently only 14 percent.\24\
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\23\ USAspending.gov, DHS Summary Data for fiscal year 2006 and
2007. Available at http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=-
1&datype=T&reptype=r&database=fpds&fiscal_year=2006&submit=GO and
http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=-
1&datype=T&reptype=r&database=fpds&fiscal_year=2007&submit=GO.
\24\ Available at http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=091&datype=T&reptype=r&databa
se=fpds&fiscal_year=2008&submit=GO.
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Approximately 42 percent ($6.6 billion) of DHS contract
dollars were awarded in fixed-price contracts in fiscal year
2006 \25\--a sharp decrease from the approximately 65 percent
($6.8 billion) awarded in fixed-price contracts in fiscal year
2005.\26\
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\25\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p.
89 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
\26\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p.
89 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
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Commercial item acquisitions accounted for $354 million in
fiscal year 2006 \27\ a decrease from the $467 million in
commercial item acquisitions in 2005.\28\
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\27\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p.
90 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
\28\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p.
90 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
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Performance-based service acquisitions, contracts that focus
on outcomes rather than prescriptive requirements, accounted
for nearly $1.8 billion in fiscal year 2006 \29\ an increase
from $1.46 billion in 2005.\30\
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\29\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p.
90 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
\30\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p.
90 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
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DHS awarded 31.6 percent of its contract dollars to small
businesses exceeding the general 23 percent small business
goal.\31\
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\31\ FPDS-NG, ``Small Business Goaling Report fiscal year 2006.''
As of July 1, 2007. Available at http://www.fpdsng.com/downloads/
top_requests/FPDSNG_SB_Goaling_FY_2006.pdf. According to the FPDS-NG
web site, the ``Small Business Goaling Report Fiscal Year 2007'' will
be available soon.
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As the above information shows, DHS is doing some things well. For
instance, DHS's use of risky contract vehicles (sole source and
commercial item acquisitions) decreased in fiscal year 2006 and the
agency meet its small business contracting goal. DHS, however,
decreased its use of fixed-price contracts and is doing more
performance-based contracting, which have been problematic and expose
taxpayers to risk.\32\ That stated, POGO has a number of additional
concerns about the state of DHS contracting and some hidden costs to
the agency and taxpayers.
---------------------------------------------------------------------------
\32\ GAO Report (GAO-08-263), ``Department of Homeland Security:
Better Planning and Assessment Needed to Improve Outcomes for Complex
Service Acquisitions,'' April 2008. Available at http://www.gao.gov/
new.items/d08263.pdf.
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DHS RESPONSIBILITY
DHS's mission is to prevent terrorist attacks in the United States,
reduce America's vulnerability to terrorism, and minimize damage from
terrorism and natural disasters. To fulfill this mission, DHS has a
vast organizational mandate that ranges from protecting the President
(U.S. Secret Service), to protecting our oceans (U.S. Coast Guard), to
protecting our borders (Customs & Border Protection and Immigration &
Customs Enforcement), to protecting our airports (Transportation
Security Administration), and to helping every town, city, county, and
State in relief, recovery, and reconstruction efforts (Federal
Emergency Management Agency). As a result, DHS has to be on the cutting
edge of innovation, technology, and services to stay at least one step
ahead of threats to our Nation. Yet, it still must protect the U.S.
taxpayers.
It is difficult to tell if DHS is meeting is contracting goals--
especially considering the emergency contracting environment in which
the agency often works. Last year, however, the House Homeland Security
Committee released a reported on ``The State of Homeland Security,''
which rated DHS in light of how it performed on seventeen homeland
security issue areas.\33\ POGO was disappointed to learn that no DHS
component received a grade higher than a ``B,'' and that four
components received a ``C-'' or lower. The two functions at the heart
of today's hearing--``Emergency Preparedness/FEMA'' and
``Procurement''--each received a ``C-.'' The fact that DHS received a
C- is indicative of the broader problems that DHS is experiencing in
contracting and that it must become more responsible when spending
taxpayer dollars.
---------------------------------------------------------------------------
\33\ U.S. House of Representatives Committee on Homeland Security,
``The State of Homeland Security: The 2007 Annual Report Card on the
Department of Homeland Security,'' April 13, 2007, p. 5. Hereinafter
``DHS Report Card.'' Available at http://homeland.house.gov/
SiteDocuments/20070413143439-12273.pdf.
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While the committee's report card stated that DHS succeeded in
awarding some contracts, it also found for the most part that the
agency failed in three key procurement measures--``cost, performance/
meeting requirements, and schedule. Unfortunately, the Department's
[DHS's] track record in all three is poor.''\34\ The committee further
stated that ``oversight and management of basic procurement processes
[have] been weak.''\35\ The report highlighted procurement missteps in
the Deepwater program,\36\ the Integrated Surveillance Intelligence
System (ISIS), and eMerge2. Those contracting missteps compound the
many mistakes made prior to and after Hurricane Katrina--some of the
same contracting problems that occurred in the ``aftermath of Hurricane
Andrew in 1992, which leveled much of South Florida.''\37\
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\34\ DHS Report Card, at p. 66.
\35\ Id.
\36\ POGO applauds the Coast Guard's decision to take over the role
of lead systems integrator for the $24 billion Deepwater acquisition
program. That shift in management and control of the program should
enhance oversight of and accountability in the Deepwater program.
\37\ GAO Report (GAO-06-442T), ``Hurricane Katrina: GAO's
Preliminary Observations Regarding Preparedness, Response, and
Recovery,'' March 8, 2006, p. 2. Available at http://www.gao.gov/
new.items/d06442t.pdf.
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The committee's findings are confirmed by more recent examples of
waste, fraud, abuse, and mismanagement in DHS contracting.
Last week, a news report surfaced about a DHS IG finding
millions of dollars wasted on sole-source Hurricane Katrina
contracts.\38\ The IG report states that the total of wasted
dollars could be at least $1 billion.
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\38\ Hope Yen, Associated Press, ``Audit: FEMA wasted millions on
no-bid contracts,'' September 10, 2008. Available at http://
www.govexec.com/story_page.cfm?filepath=/dailyfed/0908/091008ap2.htm.
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After the Government Accountability Office (GAO) detailed
problems with advanced spectroscopic portal monitors
(ASPs),\39\ devices thought to detect radiation and identify
radiological materials, the Washington Post last week reported
that the program will be scaled back with cost much higher than
originally estimated.\40\
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\39\ GAO Report (GAO-07-581T), ``Combating Nuclear Smuggling: DHS's
Decision to Procure and Deploy the Next Generation of Radiation
Detection Equipment Is Not Supported by Its Cost-Benefit Analysis,''
Statement of Gene Aloise, Director Natural Resources and Environment,
March 14, 2007. Available at http://www.gao.gov/new.items/d07581t.pdf.
GAO Report (GAO-07-133R), ``Combating Nuclear Smuggling: DHS's Cost-
Benefit Analysis to Support the Purchase of New Radiation Detection
Portal Monitors Was Not Based on Available Performance Data and Did Not
Fully Evaluate All the Monitors' Costs and Benefits,'' October 17,
2006. Available at http://www.gao.gov/new.items/d07133r.pdf.
\40\ Robert O'Harrow Jr., Washington Post, ``Radiation Detector
Plan Falls Short, Audit Shows Concerns About Cost and Effectiveness
Could Curtail Program,'' September 4, 2008, D01. Available at http://
www.washingtonpost.com/wp-dyn/content/article/2008/09/03/
AR2008090303326_pf.htm.
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GAO recently found that SBInet, a ``multiyear, multibillion-
dollar program to secure the nation's borders through, among
other things, new technology, increased staffing, and new
fencing and barriers,'' is in an uncertain state.\41\ The GAO
stated that ``important aspects of SBInet remain ambiguous and
in a continued state of flux, making it unclear and uncertain
what technology capabilities will be delivered and when, where,
and how they will be delivered.'' Additionally, ``requirements
have not been effectively defined and managed'' and management
has not been effective.\42\
---------------------------------------------------------------------------
\41\ GAO Testimony (GAO-08-1148T) Before the Committee on Homeland
Security, House of Representatives, ``Secure Border Initiative DHS
Needs to Address Significant Risks in Delivering Key Technology
Investment,'' Statement of Randolph C. Hite, Director Information
Technology Architecture and System Issues Wednesday, September 10,
2008. Available at http://homeland.house.gov/SiteDocuments/
20080910100952-17753.pdf.
\42\ Id., at p. 2.
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These three examples highlight the cost of mismanagement. The risks
and vulnerabilities associated with poor contract planning, inadequate
management, and deficient oversight cost taxpayers money. Although many
Government officials placed a lot of the blame on acquisition work
force shortages, more investigations and audits of DHS's overall
contracting system should be forthcoming in an effort to better protect
the best interests of both DHS and taxpayers.
While DHS is struggling with its contracting procedures, its
contractors are lining up to learn the tricks to receiving more
contract dollars. Fedmarket.com held a seminar on May 26, 2006, with
topics including: ``The advantages and disadvantages of selling to
DHS,'' ``Ways to keep your investment in the DHS market reasonable and
your sales costs down,'' ``Locating DHS sales opportunities,''
``Identifying DHS procurement decisions makers,'' and ``Simplified
Acquisition Procedures.''\43\ Although this is common in and around the
Beltway, it emphasizes the fact that contractors are jumping at the
opportunity to learn how to maximize some, if not all, of the agency's
contracting vulnerabilities.
---------------------------------------------------------------------------
\43\ Fedmarket.com, ``Selling to the Department of Homeland
Security Seminar,'' May 26, 2006. Available at http://
www.fedmarket.com/seminars/DHS.shtm..
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Although many Members of Congress, media outlets, and public
interest groups point fingers at the contractors, the problem is much
deeper. DHS is in a vulnerable position: the agency has poor contract
management policies and procedures, it is buying infant technologies,
and buying under emergency circumstances when competition is, by
necessity, limited or non-existent. As a result, DHS is frequently
placed in a position mirroring the Department of Defense in the 1980's.
In order to avoid the pitfalls that we have seen through history,
Congress and DHS must place a greater emphasis on full and open
competition, market research, contractor data, pre-award decisions, and
on post-award monitoring and administration. These criteria will help
establish integrity in DHS's buying system.
AWARDS TO RESPONSIBLE CONTRACTORS
DHS must improve its ability to weed out risky contractors.
Government contracts are predicated on a basic principle taxpayer
dollars should be awarded to responsible companies. FAR Subpart 9.103
states that ``[p]urchases shall be made from, and contracts shall be
awarded to, responsible prospective contractors only'' and that ``[i]n
the absence of information clearly indicating that the prospective
contractor is responsible, the contracting officer shall make a
determination of nonresponsibility.''\44\
---------------------------------------------------------------------------
\44\ Available at http://www.arnet.gov/far/current/htm/
Subpart%209_1.htm#wp1084058.
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As POGO has been urging Congress for years,\45\ the Government
needs a contractor responsibility database to ensure that taxpayer
dollars are not at risk.\46\ Questions should be raised within DHS, and
the Government in general, when contracts are awarded to risky
contractors. These include contractors that have defrauded the
Government or violated laws or regulations, contractors that had poor
work performance during a contract, or contractors that had their
contracts terminated for default. Continuing to award contracts to such
contractors undermines the public's confidence in the fair-play process
and exacerbates distrust in our Government. It also results in bad
deals for DHS and taxpayers.
---------------------------------------------------------------------------
\45\ POGO published a Federal Contractor Misconduct Database (FCMD)
in 2002 and updated it in 2007. Available at http://
www.contractormisconduct.org/. A new and improved version of that
database, including misconduct involving the Top 100 Federal
contractors will be released in fall 2008.
\46\ FAR Subpart 9.104-1 (``General standards'') outlines
insignificant responsibility regulations. Available at http://
www.arnet.gov/far/current/htm/Subpart%209_1.htm#wp1084075.
---------------------------------------------------------------------------
In an effort to prevent contracting with the ``usual suspects''
that have long rap sheets of misconduct, DHS should look for
responsible vendors during its planning and contingency contracting
phase. Some of the largest contractors hired to respond to the
hurricanes in 2005 have checkered histories of misconduct dating back
13 years: CH2M Hill (5 instances); Bechtel (12 instances); Halliburton/
KBR (20 instances); and Fluor (22 instances). Instances of misconduct
include: false claims against the Government, violations of the Anti-
Kickback Act, fraud, conspiracy to launder money, retaliation against
workers' complaints, and environmental violations.\47\ DHS is shirking
its responsibility to vet contractors and determine whether they are
truly responsible. POGO is concerned that pre-award contractor
responsibility determinations have fallen to the wayside. DHS and other
Federal agencies seem more concerned with awarding contracts quickly
rather than ensuring the Government gets the best goods or services at
the best practical price.
---------------------------------------------------------------------------
\47\ POGO's FCMD at http://www.contractormisconduct.org/.
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Another problem that faces DHS is the under-utilization of the
suspension and debarment system as a tool to weed out risky
contractors. To be fair, the problem is not limited to DHS all Federal
agencies under-use suspension and debarment against large contractors
that supply the majority of the $465 billion worth of goods and
services to the Federal Government each year. Overall, the Government
needs to reemphasize the importance of preventing risky contractors
from receiving future taxpayer dollars.
THE REVOLVING DOOR
Another issue of concern is the aging work force and the potential
for conflicts of interest in the small homeland security contracting
world. According to the GAO, 15 percent of DHS's work force is greater
than 55 years old and 20 percent of the work force is eligible for
retirement by fiscal year 2012.\48\ There is a high likelihood that we
will see many public servants leave the Government in the coming
months, and accept jobs with DHS contractors.
---------------------------------------------------------------------------
\48\ GAO Report (GAO-08-630T), Testimony Before the Senate Special
Committee on Aging, ``Older Workers, Federal Agencies Face Challenges,
but Have Opportunities to Hire and Retain Experienced Employees,''
Statement of Barbara D. Bovbjerg, Director, Education, Workforce, and
Income Security Issues and Robert N. Goldenkoff, Director, Strategic
Issues, April 30, 2008, pp. 7-8. Available at http://www.gao.gov/
new.items/d08630t.pdf.
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POGO has coined the term the ``politics of contracting,''\49\ and
we have learned about many instances of questionable employee movement
from DHS to the private sector and vice-versa. Examples include
Government employees going to work for a sole-source contract awardee
and another Government employee who is allegedly overseeing his former
company. POGO urges Congress to regulate the transition through the
revolving door and many of the ethical hurdles that it presents. DHS
should also increase transparency regarding movement between the public
and private sectors, and increase oversight and enforcement of
regulated behavior.
---------------------------------------------------------------------------
\49\ POGO Investigative Report--``The Politics of Contracting.''
The report details the revolving door between the Government and large
private contractors where conflict of interest is the rule, not the
exception. It also highlights specific revolving door cases and sheds
light on the flawed system that allows them. June 29, 2004. Available
at http://www.pogo.org/p/contracts/c/co-040101-contractor.htm.
---------------------------------------------------------------------------
OUTSOURCING GOVERNMENT
Evidenced by the Coast Guard's Deepwater program failures, DHS
should be looking at the jobs, functions, and positions that are
outsourced to service contractors. POGO is not sold on the sales pitch
that contractor employees are more effective and cost less as many
proponents of outsourcing claim. DHS should be conducting personnel
audits to determine if outsourcing went too far. Deepwater set a high-
water mark in showing what happens when a Government agency turns over
virtually all management functions to the private sector a program
behind schedule, over budget, and not meeting performance expectations.
Outsourcing also raises personal and organizational conflicts of
interest issues. The GAO studied the problem and found:
``Decisions to contract for professional and management support
services were driven by the need for staff and expertise to get
programs and operations up and running. However, for the nine cases we
reviewed, program officials did not assess the risk that government
decisions may be influenced by, rather than independent from,
contractor judgments.''\50\
---------------------------------------------------------------------------
\50\ GAO Report (GAO-07-990), ``Department of Homeland Security:
Improved Assessment and Oversight Needed to Manage Risk of Contracting
for Selected Services,'' September 2007, p. 3. Available at http://
www.gao.gov/new.items/d07990.pdf.
Many other Federal agencies are looking at this important issue and are
not outsourcing work that should be performed by public servants. DHS
must ensure that is isn't losing control over its mission and
accountability of its management.
RECOMMENDATIONS
Acquisition reform and the changed contracting landscape have
placed taxpayer dollars at risk. POGO has witnessed the weakening or
bypassing of taxpayer protections, and the unraveling of free market
forces that protect Government agencies. For years, IG and GAO reports
have exposed specific contracting missteps in individual cases of
waste, fraud, and abuse. But the findings and recommendations from the
individual cases are applicable to the larger systemic problems with
DHS's, and the rest of the Federal Government's, contracting laws and
regulations. I am not certain that anyone can provide the actual cost
of DHS contracting missteps, and therefore more needs to be done to
identify contracting waste, fraud, and abuse, as well as prevent those
errors from reoccurring in the future.
POGO has highlighted the following Government-wide contracting
problems, which we hope will be considered by the committee:
1. Cozy Negotiations.--To make every effort to get the best value
for the taxpayer, the Government must promote aggressive arm's-
length negotiations with contractors.
2. Inadequate Competition.--To better evaluate goods and services
and get the best value, the Government must encourage genuine
competition so that it can correct the trend of entering into
non-competitive contracts in 40 percent of Federal purchases.
3. Lack of Accountability.--To ensure that taxpayer dollars are
being spent responsibly, the Government must regularly monitor
and audit contracts after they are awarded.
4. Lack of Transparency.--To regain public faith in the contracting
system, the Government must ensure that the contracting process
is open to the public, including contractor data and
contracting officers' decisions and justifications.
5. Risky Contracting Vehicles.--To prevent abuse, the Government
must ensure that risky contract types that have been abused in
the past (including performance-based contracts, interagency
contracts, ``task and delivery orders,'' also known as
Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts,
under multiple award and Government-wide acquisition contracts
(GWACs), time & material contracts, purchase card transactions,
commercial item purchases, and other transaction authority) are
only used in limited circumstances and are accompanied by audit
and oversight controls.
Specifically, POGO respectfully requests that this committee
consider the following recommendations to improve DHS contracting:
1. Ensure that full and open competition is the rule and restore
the definition of ``competitive bidding'' to require at least
two bidders.
2. Require that risky contract vehicles are used in limited
circumstances and only when supported by proper justifications
and oversight protections.
3. Review DHS commercial item and service acquisitions to ensure
that a commercial marketplace exists.
4. Examine the use of ID/IQ and GWAC contracts to ensure that
contractors are not receiving improper fees.
5. Investigate how prime contractors bill the Government at their
own labor rate(s) rather than the rate that they pay their
subcontractors on Time and Material or Labor Hour (T&M/LH)
contracts.
6. Confirm that contractors are not performing inherently
governmental functions, which must be performed by civil
servants.
7. Reestablish the taxpayer-protection checks and balances that
have been removed from the contracting system.
8. Review DHS's use of the suspension and debarment system,
especially as it has been applied to large contractors with
repeated histories of misconduct.
9. Provide a fair playing field for all DHS contractors by
requiring public posting of all task and delivery order
opportunities on FedBizOpps web site, and require copies of
contracts and task and delivery orders awards be made public on
USAspending.gov.
10. Examine and improve the conflict of interest and ethics system
to ensure that DHS employees comply with all Federal conflict
of interest laws and regulations.
Thank you for inviting me to testify today. I look forward to
working with Chairman Carney and Ranking Member Rogers, and the entire
subcommittee to further explore how the Department of Homeland Security
can reduce contracting missteps that cost taxpayers.
Mr. Carney. Thank you, Mr. Amey.
Mr. Pearl.
STATEMENT OF MARC A. PEARL, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, HOMELAND SECURITY AND DEFENSE BUSINESS COUNCIL
Mr. Pearl. Chairman Carney, Ranking Member Rogers, I thank
you for the opportunity to appear before you this afternoon and
in my capacity--sorry--in my capacity as the President and CEO
of the Homeland Security and Defense Business Council, which
is, as I think you know, a nonpartisan, nonprofit organization
of the leading small, medium and large companies that provide
the product, services and technologies for every program that
encompasses our Nation's Homeland Security mission it is our
job to in essence work this Congress and with the Department to
try to achieve its mission.
Our members employ hundreds of thousands of Americans in
all 50 States. We are honored and proud to work alongside
leaders from civilian and defense agencies in support of their
strategic initiatives. The initial process of quickly creating
the Department of Homeland Security and protecting our Nation
required real-time immediate solutions and to hire reliance on
outsourcing. It resulted in a contracting and procurement
environment that is in many ways uniquely complex and
challenging. A key issue for this committee and the Department
is whether the lessons that have been learned from prior
mistakes, burdensome procedures and unintended consequences
will be incorporated into future projects. We must learn from
our past mistakes and not be defined by them. The private
sector plays a critical role in the special coordinated and
collaborative Homeland Security security mission. Our members
will not win future contracts if they do not deliver the
products and services and provide world class experts and
practitioners to the projects as needed. It is imperative that
the foundation upon which a successful Federal procurement
system is built be underpinned by credibility, by trust and
confidence.
In the post-9/11 world, Government has no choice but to be
as agile and flexible as those who seek to cause us harm, the
challenge is to find a balance between the need to strengthen
oversight, including applying aggressive controls and
transparency and the need to maintain flexibility to adjust to
rapidly changing conditions on the ground to ensure a
successful mission. Contracts that contain overly burdensome
procedural requirements, a prolonged budget process, multiple
decision-making layers, long reporting chain, overlapping
management and operations, narrow work restrictions and
insufficiently trained managers present challenges and impede
success at a time when today's Homeland Security needs demand
flexibility and adaptability.
The emphasis should be on the desired result, not merely
the process. The plan is a means. The mission is the end. The
Council supports the May 2008 statement of the bipartisan group
of House and Senate Homeland Security leaders that included
Chairman Thompson that called for more explicit requirements
and performance standards in major contracts to ensure
successful outcomes. We support a process that mirrors the new
environment and was reiterated by Mr. Gunderson discussed on
the first panel. Quality contracting, quality acquisition
management and quality people.
The new administration whoever leads it, working with a new
Congress, will have the opportunity to further build on
procurement reforms with sound program management, client side
support and improvement of the acquisition work force by
focusing on the recruiting, training and retention of more
talented contracting officials. The Council cannot emphasize
enough the need to increase the number of procurement officers
with expertise in technology, engineering and management to
accomplish the complex aspirational aspects of oversight and
review. The efforts of the Department's chief procurement
officer should be commended and supported. But I think as even
was said during the first panel, more needs to get done.
A new generation of public sector managers must be
recruited who are both disciplined and agile enough to work
expertly in Government and more closely with their industry
partners. Before an initial blueprint is drawn up, experts on
the ground and practitioners in the field need to be brought
into the process. The entire team must be equipped with an
understanding of the challenges and the risks in place during
the entire life cycle of the program to ensure success. It is
also crucial to go beyond the Beltway, to assemble teams, to
solicit input from those who are operational expert, those who
best understand the needs and issues and in the end must
implement the program to a successful conclusion are essential
to the process. The contracting process requires establishing
clear lines of accountability. We support that in the private
sector. Large scale programs maybe complex, but the lines of
responsibility must be clear. Once the mission and the goals of
the program are known, the challenge is to keep the program on
track and most importantly keep the best people on the program
as you yourself, Mr. Chairman, mentioned earlier. Our goals
should be to find the most appropriate, effective and efficient
routes to overcome these challenges quickly and with the least
disruption to the mission.
In conclusion, the GAO report cited by the House and Senate
leadership from earlier this spring found that ``contracts with
well-defined requirements linked to measurable performance
standards delivered results within budget and provided quality
service.'' This approach will ensure the success that this
committee, the next administration, the Department, the private
sector and most importantly the American people demand and
deserve in order to keep our Nation safer and more secure.
Thank you, I will be happy to answer any questions you may
have.
Mr. Carney. Thank you, Mr. Pearl.
[The statement of Mr. Pearl follows:]
Prepared Statement of Marc A. Pearl
September 17, 2008
INTRODUCTION
Chairman Carney, Ranking Member Rogers and Members of the
committee, I thank you for giving the Homeland Security & Defense
Business Council an opportunity to appear before you today. We want to
express our appreciation to this subcommittee and to the full Homeland
Security Committee for its continued leadership on the full range of
critical issues associated with Government management and procurement,
and, in particular, its leadership on initiatives to enhance the
partnership between the Government and the private sector when it comes
to fulfilling our collective mission to keep our Nation safer and more
secure. That partnership is essential to our Government's ability to
deliver high quality services to citizens quickly and efficiently.
I am Marc Pearl, President and CEO of the Homeland Security &
Defense Business Council, a non-partisan, non-profit association of the
leading small, medium and large companies focused on the homeland
security market. Our members are responsible for the operational
component of a contract--providing the products, services and
technologies for every program that encompasses the homeland security
mission for our Nation. The Council's members employ hundreds of
thousands of Americans in all 50 States. We are honored and proud to be
working alongside leaders from civilian and defense agencies supporting
their strategic initiatives through our individual and collective
expertise in technology, facility and networks design and construction,
human capital, financial management, technology integration, and
program management. I will be discussing lessons learned, best
practices and recommendations for moving forward, and how the Council
can serve as a resource to this committee and the Department.
At the outset it is important to reiterate what many have said
today and in previous hearings--that while the challenges of the
contracting and procurement environment are complex, we must work
toward finding practical solutions to these challenges. The Congress,
the Department, and, indeed, our Nation is facing a transition to a new
administration that will lead the Department forward. We hope that this
committee will work proactively to provide helpful guidance to shape
the relationships, the standards and the overall process of contracting
and procurement. We also hope the committee will work with the
Department in the evaluation of both perceived, failed, and successful
partnerships with contractors; and provide a forum in which useful
recommendations can be shared that will benefit all of the
stakeholders.
The Council supports the ``quality-control'' of congressional
oversight and values your role in encouraging and prodding, if/when
necessary to achieve these goals. It is our responsibility to develop
with this Congress, and the Department, a functional, practical,
effective process by which--when the decision is made to outsource a
project--to know the specifics, adhere to oversight, and develop a
management-contractor relationship that is based on realistic goals and
expectations in order to achieve the most successful outcome for all
the stakeholders. There are linkages between each phase of a large and
complex program, and a third party providing advice and counsel is one
critical link that ensures success and is often impossible to achieve
if it missing.
We believe that the goal of establishing a ``culture of
preparedness'' that serves to prevent, detect, protect, respond and
recover in the event of a catastrophic emergency--whether by a
terrorist or natural disaster as we have witnessed many times in the
past few weeks alone--is best achieved when the stakeholders work
together in a vibrant partnership. This partnership then provides our
Government with the ability to access the best solutions and
capabilities to achieve mission success--a safer and more secure
Nation.
LESSONS LEARNED
Building a national security apparatus from scratch is one of the
most formidable bureaucratic feats imaginable. The Department was given
a very large, complex and important mission, and early on was short of
adequate resources. The initial process of creating the Department and
attempting to identify and meet the needs of our Nation quickly meant
that there would be more outsourcing than usual. Private contractors
have been instrumental in supporting and in providing the substantive
and procedural expertise to achieve our collective mission.
The Department of Homeland Security has been working feverously
since its creation and continues to demonstrate its commitment to keep
up with these forces for change. While we have seen many incremental
successes even the leadership at DHS admits that much work remains to
be done. For example, after 5 years, many of our members remain
frustrated in some of their relationships, or even in attempting basic
business dealings with DHS. DHS officials have told us that they
recognize that there have been missed opportunities, burdensome
procedures and complex challenges. We are also cognizant of the fact
that a process of focusing on and promoting policies and programs that
encourage the private sector to continue to invest in homeland security
is taking shape, slowly but surely. It would be extremely detrimental
to our Nation for the private sector to walk away. That would only lead
to failure for both DHS and our Nation.
The private sector simply wishes that the Government articulate its
objectives and requirements in a clear and/or concise fashion.
Articulating goals at the outset of any contract, and then having the
terms and conditions flow from it, is the bedrock of good project
management. It is inherently unfair and discouraging to companies that
seek to provide their expertise and technologies in ways that could
help the Nation when there is no coherent foundation to begin with. If
a procurement contract is vague in its requirements, the chance of
failure increases, and everyone loses.
The key issue is whether lessons that have been learned from prior
mistakes, burdensome procedures and unintended consequences will be
incorporated into future contracting. After each contract experience
our members learn and adapt their business procedures accordingly. Each
of us wants the best possible outcome, but achieving it requires a team
effort for successful project and program delivery on schedule and at,
or below, cost.
This is the time and a perfect opportunity to step forward--
recognizing the many positive achievements, evaluating why they were
successful, and using the time to provide a blueprint that the next
administration and its DHS leaders can use to be even more successful.
We must learn from our past mistakes and not be defined by them.
THE FEDERAL PROCUREMENT SYSTEM
Mr. Chairman and Members of this committee, the Federal Government
has the largest and most complex procurement system in the world by any
measure, and the Department of Homeland Security is one of its largest
components. Since public funds are involved, it is imperative that the
foundation upon which a successful Federal procurement system is built
must be underpinned by credibility, trust, and competence. As such, we
share your commitment to ensuring that the Federal Government in
general, and the Department of Homeland Security specifically, only do
business with responsible, ethical parties. Every one of our members
who enters into contracts with the Federal Government is fully aware
that this is a privilege--not a right. Our members have just as much
desire for positive outcomes as the Government wants them to have.
We in the homeland security Federal contracting space recognize the
important role we play in achieving the special mission our country
took on 7 years ago last week. In fiscal year 2006, the Department of
Homeland Security spent more than $15 billion on nearly 67,000
individual contract transactions--$5 billion of which was spent on
management and professional support services--awarded to almost 16,000
contractors. It is also important to point out that, to its credit,
more than $4.5 billion of the DHS prime-contracting dollars went to
small business.
It is notable that, even with its size and complexity, the Federal
acquisition system actually works with and serves the public quite
well. Clearly, it is also a system that faces many challenges and has
areas where improvements are needed. Real fraud and abuse, while deeply
troubling whenever uncovered, is actually relatively rare, and the
Government has in place a wide array of generally effective statutes
and standards that apply to entities seeking to do business with it.
When there are mistakes, our members have a deep and abiding
interest in seeking to correct them as much as, or more than, does the
Government. Our members will not win future contracts based on poor
performance; they will win contracts because they can deliver the
products and services, and provide world-class experts and
practitioners to the effort.
The Federal procurement system is a complete life cycle--from
requirements development to solicitation, award, performance and
contract closeout. Each phase of the process is dependent on the other,
and on multiple parallel processes. The Federal procurement rules are
complex and provide many opportunities for honest mistakes. Intentional
misconduct, however, is rare and should be fully prosecuted, but we
realize that even these allegations undermined the trust and confidence
in the performance of the acquisition process. There must be urgent
attention paid to the Federal acquisition work force and to the
relationships between agency mission needs and acquisition outcomes.
Problems must be thoroughly and factually analyzed to ensure that root
causes are properly identified and their effects on the Federal
procurement life cycle understood.
We all understand--as the title of this hearing indicates--that
waste and mismanagement is a very serious issue. Taxpayers demand
solutions. I am here today to be part of the solution.
If lenient controls or processes exist--the contracting
industry wants to work with Government to tighten them.
If there is a need for better oversight of the private
sector's work--the contracting industry will aggressively work
with the Government to ensure that occurs, as we believe we do
today.
If there is a dearth of contracting expertise at DHS--the
contracting industry will partner with Government to address
the need for greater education and training.
When properly outlined at its beginning, appropriately managed, and
adequately overseen during its delivery, Federal contracts can, and
most often do, generate desirable and substantial benefits for our
Nation. If the contract is specific, has taken into account economic
reasonability and technological feasibility, and effectively balances
the substantial risk incurred by the performing contractor with
appropriate rewards--everyone wins.
The Council and its members have worked closely and successfully
with the senior procurement executives at DHS to ensure that the system
and the process work for all parties concerned. We are all passionately
dedicated to the successful realization of the agency's mission.
A NEW CENTURY, A DIFFERENT WORLD, A NEW ADMINISTRATION, A DIFFERENT
OUTLOOK
In the post-9/11 world, Government simply has no choice but to be
agile and have systems in place that are as flexible as those who seek
to cause harm. Government must also be instantly responsive to sudden
events--be they man-made or natural--that disrupt our communities and
the national economy.
The challenges of this new environment are daunting. Whether it is
helping to create a new agency that must seamlessly coordinate
different cultures, secure over 100,000 miles of land surrounding our
borders, ensure that every container entering our ports is safe, search
every piece of luggage boarding an aircraft, we are all dependent on
the rapid adoption and successful implementation of the most effective
technologies and expert human capital to accomplish each new mission
without significant interruption.
In rising to this challenge, Government's historic approach to
development of programs, implementation of project management, and
oversight of the process are realistically being put to the test.
Traditional hierarchical approaches are facing the speed, complexity,
and diversity in today's economy and we need to have homeland security
solutions in place as soon as possible. Long reporting chains,
overlapping management and operations, narrow work restrictions,
insufficiently trained managers, and compartmentalized operating units
are no longer acceptable if we are to achieve the mission.
Procurement time frames are unnecessarily lengthy, often making the
best technologies obsolete and wasting human capital and resources
between the time a Request For Proposals is issued and a purchasing
decision is made. Detailed procedural requirements, prolonged budget
processes, multiple decisionmaking layers, and detailed design
directives impede success when today's homeland security needs demand
flexibility and adaptability.
This is by no means a challenge specific to Government alone.
Neither the public nor private sectors are immune to change. Many
organizations are revamping the old organizational charts of closed
boxes sealed off into distinct columns. In their place, they are
shaping a dynamic web in which participants connect and cooperate on an
on-going, networked basis.
QUALITY CONTROLS, PROCESSES AND RESOURCES
The Council and its members support a process that mirrors this new
environment and urges that the Department embrace these priorities as
it moves forward in revitalizing its procurement process:
1. Quality contracting;
2. Quality acquisition management; and
3. Quality people.
The unique mission and newness of the Department requires a
constructive dialog and expert input to build the internal agency
infrastructure and make the changes essential to having a strong,
effective contracting process.
Many of your colleagues on both sides of the aisle and both sides
of the Hill, the GAO, academics, and other outside organizations, have
identified many of the elements necessary for a strong contracting
process: a performance work statement, measurable performance
standards, and a quality assurance plan.
The Council supports the May 2008 statement of the bipartisan group
of Senate Homeland Security & Government Affairs Committee Members
that, together with Chairman Thompson, called for more explicit
requirements and performance standards in major contracts to ensure
successful outcomes.
Successful missions need due diligence, specificity of terms and
outcomes, and thoughtful expert oversight. The Council's members
support making certain that the contractor knows specifically what is
needed in order to achieve success. Additionally, we want and need
processes in place that provide expert oversight officials with the
least burdensome and highly dynamic ability to accurately measure
performance.
The challenge is to find a balance between the need to strengthen
oversight, including applying aggressive controls and the need--
particularly as it relates to homeland security--to maintain
flexibility to adjust to rapidly changing conditions on the ground and
ensure a successful mission/project. Private industry welcomes expert
contracting management and oversight officers. We do our best work when
specific feedback is part of the process.
A new administration working with a new Congress now has the
opportunity to further improve on procurement with sound program
management, client-side support, and the improvement of the acquisition
work force by focusing on the recruiting and training of more talented
contracting officials. There should be integrated project teams, led by
the Government, but with operational involvement of contractors. We
urge that the Department continue to develop acquisition work force
tools to forecast needs and develop certification requirements.
The largest contracting office within DHS, the Office of
Procurement Operations, had three people on board in 2003. Today, there
are 200. Without these individuals, DHS can't procure the goods and
services they need to secure the homeland. It cannot, however, be just
about numbers, but also the securing of contract specialists with the
requisite skills--on-the-ground experts who understand the mission and
objectives of the project at the beginning--so that there are as few
``surprises'' as possible and a shared understanding as to timely
delivery and specific and realistic expectations. A highly skilled work
force that can conceptualize, monitor, and administer the highly
complex programs and contracts will minimize failures.
The Council cannot emphasize enough the need to increase the number
of procurement officers with expertise in technology, engineering and
management to accomplish the complex operational aspects of oversight
and review. While we recognize that there is a shortage throughout the
Government of expert contracting officers, the efforts of the Chief
Procurement Officer at DHS should be commended and supported. For
example, in addition to a number of other significant initiatives she
has announced the establishment of an important Acquisition Intern
Program that should strengthen the acquisition work force by
attracting, hiring and training exceptional new talent, and developing
a pipeline for future acquisition leaders.
PARTNERSHIP, SKILLS AND A CULTURE OF CHANGE
Nowhere is the need for a close partnership between the public and
private sectors more evident than when our Nation needs to prepare,
deter, and, if necessary, respond to catastrophic emergencies within
our borders. The extraordinary efforts that our public servants and
private sector leaders have engaged in since September 11, 2001, are
evidence for necessary and mutually beneficial partnerships.
We must, however, move even more rapidly toward responsible and
appropriate ways of fostering greater cooperation, collaboration and
communication.
Government needs to seek out new approaches to work together with
the private sector, with greater predictability and cost-effectiveness.
When working with the private sector, it is best to introduce a
partnership approach early on--and build on it. New restrictions on
Government contracting won't make our borders safer--greater innovation
will.
Government must continue to build the internal skills necessary to
match the capabilities sought from the private sector--including the
capacity to manage complex relationships. It is important to invest in
developing program, project, and procurement management capabilities
within the civil service. The complex and unique nature of the projects
essential to our homeland security require contracting officers who
possess an adequate understanding and are given the resources to carry
out their responsibilities with integrity and transparency.
When there are large and complex contracts there inevitably will be
issues--but they can't weaken long-standing relationships or the
realization that we're all in this together. Government must take the
lead in shaping a new kind of supplier partnership to ensure greater
accountability--by aligning incentives, sharing risks, and measuring
performance.
For example, the Homeland Security & Defense Business Council, more
than 3 years ago, offered DHS help with the challenge of increasing the
number of certified project managers by offering to help fund a new
certification program through the Project Management Institute. Our new
relationship with Georgetown University's Public Policy Institute,
which offers a certificate in Homeland Security Studies, will provide
input and aid in developing the curriculum for the first generation of
students who will be employed throughout the private and public
sectors. These and other programs can help create a new generation of
public sector managers that are both disciplined and agile enough to
work expertly in Government, and closely with industry, to achieve a
new level of performance.
DHS needs not only the expertise but also the full cooperation of
the private sector to succeed in homeland security. The private sector
often has the capabilities and technologies that DHS needs to
operationalize its mission. In other words, DHS establishes the
priorities based on risk but they often don't have the inherent
capabilities to make those programs successful--they must often rely on
the private sector to develop the programs--including the technology--
and to make the programs work.
THE PROCUREMENT PROCESS AS PART OF A LIFECYCLE
The Council believes that the acquisition process is part of a
lifecycle that must begin earlier than contracting activity itself.
Before the ``blueprint'' is drawn, experts on the ground and
practitioners in the field need to be assembled and questioned. A
successful process also requires equipping the entire team with an
understanding of the challenges and risks in place during the entire
lifecycle of the project to ensure success. Quadrennials, which provide
a strategic view of priorities/budgets, operational requirements, and
programmatic alignments, guarantee cost efficiencies and mission
achievement.
This will provide an opportunity for Government to include the
private sector in the Department's long-range priorities and long-term
needs to improve understanding and direct R&D efforts. The Quadrennial
also provides the private sector with an opportunity to educate the
Government about gaps in technology or capabilities, and to set
reasonable expectations about timeliness and cost of delivery.
THE CHANGING DYNAMICS OF THE ``NEW WORLD''--BEING FLEXIBLE AND PLANNING
FOR CONTINGENCIES
The culture of challenging assumptions of the past depends on
flexibility and decentralization--not a rigid adherence to checking off
boxes. We must recognize that priorities change and plans will
sometimes require adjustment to account for changing circumstances.
Given the importance of maintaining public support and achieving
overall mission success, flexibility is a crucial element of any
program--specifically the ability to deploy innovative technologies and
human capital--sometimes more nimbly than the Government's existing
work force and capital resources would permit.
Similarly, it's important to plan for appropriate contingencies.
It's rare that expected developments cause problems. Flexibility,
however, must be coupled with a rigorous commitment to execution.
This approach is not at all about cost savings, but rather about an
effective response to our Nation's clarion call to have a system in
place that can efficiently and effectively provide mechanisms to secure
our homeland and respond to catastrophic incidents.
The private sector and Government will always need to respond
quickly to emerging threats, but to the extent that we can think in
tandem and more strategically, it helps us in the private sector better
serve the Government need by permitting discussions earlier in the
process--away from the actual contracting activity--to allow robust
exchange of ideas without compromising the integrity of the process.
MOVING AWAY FROM BEING ``BELTWAY-CENTRIC''
It is crucial to go ``beyond the Beltway'' to assemble teams and
solicit input from those who are operational experts--those who best
understand the needs and issues and in the end must implement the
project/program to its successful conclusion. The Federal Government
and the American people are entitled to access and consultation with
the best professional talent and technology--both in the private and
public sectors--that can be utilized to ensure success of mission.
EMPHASIZE THE RESULT--NOT THE PROCESS
Perhaps as a consequence of its unique mandate and nature, the
focus within Government too often tends to be on the process rather
than the result. Missing the forest for the trees is an occupational
hazard in both public and private sectors, but the impact in Government
agencies can be especially debilitating. The plan is a means--the
mission is the end.
ESTABLISH CLEAR LINES OF ACCOUNTABILITY
When responsibility for a project is parceled out in unconnected
pieces, it is difficult to pin down who is accountable when
expectations fall short. Large-scale programs may be complex, but the
lines of responsibility must be clear. Rather than rely on process
standardization, it is vital to introduce the principles that
characterize the 21st century organization, including its dependence on
partners to achieve its results.
CONCLUSION
Rather than rehashing history, the Council would like to recommend
the building of a path toward the future so we can move this process
forward. We must learn from the past, not be defined by it.
Once the mission and goals of a project are known, the focus needs
to be on keeping the project on track and most importantly, to keep as
many of the best people on the project as possible.
The Council is offering to work with the committee as a neutral,
but very interested actor, to be a conduit between the public and
private sector to achieve these goals of reform--to identify and find
real world solutions to contracting challenges and work toward better
accountability, diversity in the homeland security community and, most
importantly, to ensure a sound, fair, and responsible contracting
process.
Government and its partners share the same goal. We want to see
projects completed on-time and on-target. We want to see programs that
meet their objectives. We understand sometimes there are roadblocks.
Our challenge is to find the most appropriate, effective, efficient
routes to overcome them quickly and with the least disruption to the
mission. We can do this by working together in meeting the goals of our
common mission.
The public and private sectors--working from previous
recommendations and developing new ones if necessary--must be able to
work from the same strategy. In the GAO Report cited by the House and
Senate leadership from earlier this spring, it was found that
``contracts with well-defined requirements linked to measurable
performance standards delivered results within budget and provided
quality service.''
To be successful, this will include:
Greater support for the recruitment, development, and
retention of a corps of modern managers skilled in the
complex--and essential--task of meeting the mission by building
links and reaching out beyond the public sector to whomever can
serve the interests of the Nation.
The ability of public and private sector managers to be
equipped and able to speak out if there are newer technologies
or better solutions.
A better and more specific planning throughout the lifecycle
of the project with more focused, proactive oversight.
This approach will get our Nation where it needs to go--where this
committee, the next administration, the Department, the private sector
providers of services and technology want us to go--and will ensure
that we get there together.
As another GAO Report from April pointed out the Department has to
undertake these critical missions while also working to transform
itself into a fully functioning cabinet department--``a difficult
undertaking for any organization and one that can take, at a minimum, 5
to 7 years to complete even under less daunting circumstances.''
In the face of a transition, and a strong desire of all the
stakeholders to move forward in achieving of our common mission, this
is certainly the time to evaluate, question and develop a foundation of
support for the agency tasked with securing our homeland.
On behalf of the Homeland Security & Defense Business Council, I
appreciate the opportunity to provide our comments on the important
issues before the subcommittee. The Council desires to provide this
committee and DHS with the support, expertise, and input you need to
ensure that sufficient resources are afforded and appropriate processes
are in place to achieve success. We look forward to working with the
subcommittee as it continues its deliberations.
Mr. Carney. We will now begin the second round of
questions. Each Member will have 5 minutes. I will begin with
myself. Ms. Madsen, you mentioned that data--you didn't have
data, that the data was not available. Was the data not up-to-
date while you were making your reports? What was the case?
Ms. Madsen. Thank you. Are you referring to the competition
data?
Mr. Carney. Yes.
Ms. Madsen. Okay. What we found--and I can tell you looking
at data from FPDS changed my hair color during the course of
the panel. What we found is that the Federal procurement data
system, next generation simply, there was data available, the
high level about competition, but not at a granular level. When
you look at the amount of the Government's procurement spend
and the percentage that went through interagency contracts
through the ordering process that did not go off on contract
awards but went off on order, there was no data available at
all. I think that is probably still true.
I don't think the system has yet picked up those orders
that are placed under those multiple award--multiple agency
contracts.
Mr. Carney. Can you speculate as to why that is the case?
Ms. Madsen. They didn't collect--I think they have now
started to collect it. But the system was focused on capturing
data about contract awards, not about data on orders under
existing contracts?
Mr. Carney. Okay. Now, I want to kind of talk about
Deepwater for a moment if we might, Ms. Madsen. Even after we
saw what happened with the project and these ships that were
basically unfloodable was your point, the contractors were
still given a $4.6 million bonus. Now, why would something like
that happen? What is in the nature of a contract like that that
would allow that to happen?
Ms. Madsen. Mr. Chairman, I don't know any more about
Deepwater than what I can read in the GAO reports and the IG
reports.
Mr. Carney. Well, there were certain incentives written
into the contract that were not performance-based actually.
Ms. Madsen. Sir, I don't really feel competent to answer
that question specifically. I can, I think, say, based on our
work and not with specific reference to Deepwater that we
consistently found, that when you don't have a good definition
by the buyer of its requirements and very firm performance
criteria that it is very hard to measure what performance is. I
would guess, and that is what I am doing, that they have got
those kinds of issues here.
Mr. Carney. Mr. Amey.
Mr. Amey. Again, I haven't followed the Deepwater awards
fees that well either. But one issue that you also have to
consider is that we have heard from certain contracting
officers in the past that a lot of times it is easier to award
those bonuses than it is not to avoid any possible litigation
or complaints from the contractor as well as poor performance
in the future. So I don't know if that is--you know, in
essence, that may even be a bribe in some people's minds. But
it is an issue that you have to take into account that a lot of
times with performance measures, with evaluations of
performance, it is very difficult as Ms. Madsen says, but there
is a possible--if it isn't well-defined, then it isn't easy to
measure. Then at that point there are possible potential
hurdles for the contracting officer and it could slow down the
program if they were to award all the money. We have seen
instances with that in Department of Defense programs.
Mr. Carney. Do we see many conflicts of interest with
contract procurers doing contracts for their parent
organization?
Mr. Amey. Not that I am aware of. I do have a few instances
outside of Deepwater where there is some interesting conflict.
Mr. Carney. I am sorry. Not specific to Deepwater, but
outside the----
Mr. Amey. Well, Deepwater, I think presented a natural
conflict of interest too because you handed over so much
authority over to the--you know, over to the lead systems
integrators that at that point the Government, you know, was in
a position where I don't even know if it could administer--
effectively oversee that contract. I think that is what we are
seeing even now once it came back in house, that there were
some questions raised on how soon the Government and DHS and
the Coast Guard will get up to speed in being able to
effectively monitor and oversee that contract.
We have seen it in some other instances with DHS
contractors where we have seen some people come in from the
private sector that are overseeing, or are very involved with
their former private sector employers and we have also seen
some instances, specifically some with Katrina, where I have
some outstanding FOIA requests with DHS in which I am trying to
get down to the facts of very large no-bid contract that was
awarded, and then within days, the person left and went to work
for a contractor that received that award. From what I am
hearing, there is a possibility that there is a criminal
investigation that is taking place involving that instance. So
there may be something more that comes out that you will read
about in The Washington Post or that we would come to your
committee with.
Mr. Carney. I certainly hope that is the exception and not
the rule. We will readdress this in the next round. Mr. Rogers
for 5 minutes.
Mr. Rogers. Thank you, Mr. Chairman. Mr. Amey, in your
prepared remarks you made a point that nearly 40 percent of all
contracts--of contract spending is awarded without competition
and I would ask you first, and then the other two witnesses to
tell me, why do you think so many of these are not being
competed?
Mr. Amey. It all boils down to your definition of
competition. That number could be higher if you include the 20
percent of one-bid contracts that Ms. Madsen referred to. But
it boils down to, I think, DHS--their number, I think, was very
high because of Hurricane Katrina. They were placed in a
position where competition either had to be done away with or
at least very limited. That was just poor planning. Again, that
goes back to my comments about comparing GAO reports that were
tied to Hurricane Andrew. I think the DHS and FEMA were stuck
flat-footed. I don't think they were prepared. They should have
contracts in line for car, for cell phones for--you know, all
the different things that they needed. That was preplanning.
They didn't have anything to do with an acquisition workforce
issue. That was just bad planning I should say. Bad
preplanning.
But when you add in continuations of bid contract when you
add in the fair opportunity for a lot of these multiple award
contracts where they are considered competed on the front end
but not on the back end. Ms. Madsen can go into that because I
know that was one of her recommendations if her panel's report,
was that we extend currently DOD has to bid multiple award
contracts. But we don't have it for the civilian agencies. That
may be something that the subcommittee wants to take a look at
and to add a second layer of competition into the system.
Mr. Rogers. Ms. Madsen. The question again was: Why do you
not see more competition?
Ms. Madsen. I actually think the picture is pretty complex
based on the work that we did. I can't say that 40 percent is
the right number. Government-wide the number that we were able
to identify on contracts was about 36 -ercent in fiscal year
2004. That did not account for the instances where only one
offer was received. It did not account for task order awards
under IDIQs. So the number is probably higher. I think there
were some things in the mid-1990's to 2000 time period that
probably--including the huge reductions in the workforce and
the pressure to get things awarded that have resulted in this.
These numbers based on what we could tell, were pretty
consistent over the past 10-year period. I mean, so they are
not for the Government they are not up, but I think our
comparison, which was to what--what do large private sector
buyers who are buying services, what do they get, their
competition is a lot more rigorous. That is really what we were
trying to compare to, is when you are looking at private sector
buyers who are buying large IT heavy services which is mostly
what the Government is buying these days, you know, what are
they doing? And it just didn't measure up.
Mr. Rogers. What about--Mr. Pearl, why?
Mr. Pearl. In what context?
Mr. Rogers. Why didn't it measure up? I mean, we are
talking about your member companies. Why isn't there more
competition among them to try to get these contracts?
Mr. Pearl. Well, I think as I alluded to both in my written
testimony and my oral, there is a sense in--at least in--and I
am only speaking about the Department of Homeland Security--is
that in the context--is that early on there is a sense of
frustration because it was taking a long time to get a
response. It was taking a long time to get--have your A team as
the Chairman was talking about ready to go and that by the time
in essence decisions were made, that A team might have been
pulled for another project, another program. So that in
essence, what I have heard from a number of our members is that
early on there was a sense of frustration.
Therefore, if I have already bid on this and it has taken
so long, am I going to spend a huge amount of dollars in
research and development to bid on another which might be just
as good or better? But, in fact, they couldn't afford that. So
frustration was an early stage. The whole nature of the
immediate need, I think, in terms of being able to preplace the
product, the service, the technology on the ground as quickly
as possible in terms of meeting the mission of what was trying
that this Congress and what the Department was trying to
accomplish early on is also one of the reasons why I would not,
with any data in front of me, suspect that there was, in fact,
one bid or no bids on certain situations.
What I don't know, and I think it is worthy of at least
looking into over the course of in the months to come as we
look forward as opposed to looking back, is whether there
really is any correlation, however, with the title of this
hearing. Whether, as a result of a one-bid or a no-bid
contract, does that necessarily correlate to greater waste or
abuse or mismanagement? I haven't heard that. I think that is
an issue that the committee and the subcommittee is looking at.
But there is not necessarily any correlation to the fact
that a contract wasn't fulfilled to its ultimate end
successfully or not, because there was one-bid or no-bid or a
competitive bid situation.
Mr. Rogers. I think as you heard from Ms. Madsen earlier,
generally when you find there is a one-bid contract there is
going to be an inflated cost to that contract. That has been my
experience in the private sector, and I think all of us feel
that is probably what is happening, although it may be an
inaccurate feeling. My time is up. I yield back.
Mr. Carney. Thank you, Mr. Rogers. The Chair recognizes the
gentleman from New Jersey, Mr. Pascrell.
Mr. Pascrell. Mr. Chairman, I want to confer and agree with
the gentleman, my good friend from Alabama. I want to take it a
step further. That is we have had one-bid contracts and no-bid
contracts. I would like to know a yes or no answer from each of
the participants in panel No. 2. Do you believe that a
contractor should be utilized--we are talking about
nonemergency situations--should be utilized when there is no-
bid or there is one-bid if that person--if that contractor has
contributed to the Executive branch of Government, pay-to-play?
I am from New Jersey. We are experts on that.
Let me ask you the question, though. Do you think that that
contractor should be able to called in to do that work if that
contractor in a no-bid or one-bid situation has contributed to
the Executive branch of Government? Yes or no.
Ms. Madsen. What do you mean by ``contributed''?
Mr. Pascrell. Contributed in a political campaign.
Ms. Madsen. So not contributed a work product?
Mr. Pascrell. No, no, no. I meant contributed to--you know,
legally contributed to--we are talking legally here obviously.
Legally to a Presidential candidate. What do you think there,
Ms. Madsen?
Ms. Madsen. I don't think the question is that simple
unfortunately because I think almost every major player
probably contributes. So--and there are legitimate reasons and
there are statutory exceptions that permit----
Mr. Pascrell. Remember, I said--I am not talking about an
emergency.
Ms. Madsen. I am going to tell you I can't answer that yes
or no.
Mr. Pascrell. Thank you. Mr. Amey.
Mr. Amey. My answer is no, they shouldn't be able to get
that award. It is actually one of the recommendations--we put
out a report in 2004 called the politics of contracting and we
looked at this issue. Specifically, one of the things that we
said was we should roll back to the pre-1976 era when
contractors weren't allowed to give money. The offshoot of that
was the designation of PACs. So that is one of the things we
have said is okay, contractor PAC, shouldn't be allowed to give
money.
Mr. Pascrell. Since your report came out in 2004, has there
been an adherence to that report or have things gotten better
or worse?
Mr. Amey. I would say they have remained probably with the
status quo. The report actually looked at lobbying
expenditures, campaign contributions, individuals and PACs, as
well as the revolving door.
Mr. Pascrell. Mr. Pearl.
Mr. Pearl. On its face, you are saying that the
contribution to any political campaign, be it Congress or at
the Executive level, is a legal contribution. My response
should be--would be that that that is ostensibly in a
transparent world, which we are calling for, where there is, in
essence, across the board, total understanding of notice,
across the board that that is a consideration in terms of the
part of the process, I don't see any reason why, if it is legal
to give a contribution, that they shouldn't be able to and
compete fairly in the free market.
Mr. Pascrell. Okay. Mr. Amey, I think we have seen time
after time that the DHS contracts are yet another effort by the
folks down the street to guarantee more work for private
contractors with contracts that contain few specifics and
suffer from lax oversight. If you look through all the reports,
you know, that is pretty much a common strength role of those.
This is a part of a larger pattern of behavior that
believes that every private contractor should be given a free
hand and be trusted implicitly not to choose their own profit
margin over providing quality and cost-efficient products and
services paid for by all of us, the taxpayer. This pattern was
demonstrated time and time again, notably in the relative
failure of Project 28 to work as advertised on the U.S./Mexican
border, as well as numerous military contracts given to
Halliburton, KBR in Iraq that were proven to be rife with
fraud. I mean, we figured that out. Somebody else--a third
party figured that out. I want to ask you this question: To
what extent have you found that the Department of Homeland
Security shifts its decisionmaking authority to these private
contractors?
Mr. Amey. We have most of our recommendations take a look
at the agency just overall, and it is based on specific
instances that come in. But it is based on the overall
contracting world. So what we see isn't necessarily based on
DOD reference to a lot of what is going on in Iraq and with DOD
contractors. That is a problem there too. A lot of it goes back
to our overall contracting system and what we developed in the
mid-1990's, the buying of commercial items and services more
like the private sector. The private sector makes the trade-off
of profits versus key oversight. I don't think the Government
can afford that same balancing test. I think we need to add
more oversight to the process and there is certain types of
contracts, commercial item contracts where Government officials
don't have access to the cost or pricing data that they need.
Mr. Pascrell. So this not just an executive problem. We
can't shift the entire blame to the Executive branch of
Government. The Congress cannot fulfill its oversight
responsibilities under the Constitution. This is the 221st
anniversary of the signing of the Constitution of the United
States of America. It either is a working document or it is
simply for awards, right, Mr. Amey?
Mr. Amey. I would agree with that.
Mr. Pascrell. So your conclusion is what today?
Mr. Amey. To make sure that Federal agencies and
contractors are spending taxpayer dollars wisely.
Mr. Pascrell. So all of the discussions that we have had,
has anyone gone to jail? I just thought I would ask the
question.
Mr. Amey. There are a few Department of Defense officials
and I think there may be a few Department of Interior officials
that may soon be going to prison.
Mr. Pascrell. Make an announcement about that.
Mr. Amey. It is major news around Washington, DC.
Mr. Pascrell. You are laughing, but I know you are a
serious person. This galls me, Mr. Chairman, that we are into a
situation 7 years later and we are asking questions that we
don't have resolution to. Not only do we have the longest war
maybe in the history of mankind, you know. But we have the
longest oversight which produced nothing. Now, let me see if I
can figure that out.
Mr. Carney. Well, figure it out in the next round of
questions, Mr. Pascrell.
Mr. Pearl, I was struck by your testimony, your written
testimony about the flexibility aspect of what you should be
able to offer. I would like you to explain how we are--become
more flexible if we have to respond quickly to events. How do
we on the one hand provide the kind of oversight and strong
contractor we need while remaining flexible enough for the
community you represent to react?
Mr. Pearl. I am not just talking about flexibility, Mr.
Chairman, within the private sector. I think that the
flexibility has to come from the contracting officers and from
the understanding of what the needs are toward the end mission.
I think that the flexibility that I am talking about is
precisely within the context of the contract. Even in the
private sector, that, in essence, conditions change,
circumstances change and that the recognition that you cannot
state that this is the way it is going to be, because we are
going to provide this amount at this price in this local, for
example, in a hurricane situation when this point of fact, the
hurricane may have hit 100 miles west or 200 miles south or
whatever that might be.
The flexibility is sometimes there might be transportation
costs involved that you have to take into consideration. That
is just a very minor example to what we are talking about. So
the flexibility we are simply talking about is that when you
have strong oversight, which we are calling for, and I agree
with Mr. Pascrell, that we in the private sector benefit from
greater oversight. I called for that in my written and oral
testimony. We agree with that. If there is great oversight, if
there is tremendous transparency, then point of fact that the
parties working in partnership, and that is something we in the
private sector have not seen as closely, that we have been kept
at an arm's length, so that therefore, here is the contract, do
it the way we want to do it, but we are not going to be
partners in this enterprise in terms of the overall mission.
What we are calling for is we have a greater partnership in
any relationship that you have, a personal relationship--I have
learned for 31 years after being married to a psychotherapist
that the whole nature of being flexible is a necessary
component toward a healthier relationship. Well, that is the
kind of relationship that we in the private sector are looking
for with respect to our partners in the public sector. That is
the flexibility that we are talking about so that we can, in
fact, meet the ultimate goal and mission.
Mr. Carney. We are all married to psychotherapists, Mr.
Pearl.
Mr. Pearl. Mine is at home.
Mr. Carney. Mr. Amey, you talk about creating a database, a
contractor responsibility database. How could the Department
benefit from that?
Mr. Amey. I think it would allow the agency to make better
contracting decisions where we have seen instances in the past,
even just a few of the names of contractors that Representative
Pascrell mentioned were contractors that have a very
questionable track record. The FAR has a provision in that says
the Government is supposed to contract with responsible
contractors only it is very difficult to define who is
responsible, who is not.
Is an instance from 5 years ago still relevant now? But if
you have violation--contract fraud violations, violations of
the Foreign Corrupt Practices Act, different false claims given
to the Government, product substitution. Those are instances I
think contractors should know and should take into account when
they are deciding to award a contract up-front, as well as
suspension/debarment officials at the end.
One of our claims is that the Department of Homeland
Security hasn't taken--hasn't used the suspension and debarment
process as much as it should. One of the questions I get from a
different agency was if I would have known that contractor
already entered into three administrative agreements, I would
have never entered into the fourth. Government officials don't
have the data necessary to make certain decisions that they
need before and after awarding a contract.
Mr. Carney. Ms. Madsen, do you agree?
Ms. Madsen. Not exactly. I think there is probably a
misapprehension there. To put an offer or a bid on a current
contract today, the contractor has to disclose if he has
settled any false claim, if he has false claims judgments
against him, if he has any criminal penalties against him, if
he has had any falsification of documents if he has had any
environmental violations. So there is a process that already
exists for every offer that is submitted for that information
to be made available. The debarment suspension list is a public
list--it is public. It is accessible on the Internet. So I am
not quite sure what an additional database would add to all of
that. This isn't something that our panel necessarily looked
at. We did, however, say that particularly where we have got
this blended workforce issue that there were additional
protections of a different kind that needed to be put in place.
Mr. Carney. Mr. Pearl.
Mr. Pearl. I agree. I don't represent a single member who
meets the essence of the questions that you were asking
obviously. But seriously, I think that the context is that in a
world where there is transparency and greater oversight and
then the kinds of issues that POGO talks about will be dealt
with in a much more open and fruitful fashion for everyone. I
think that the whole nature of what the Chairman of this
advisory board has said in terms of Ms. Madsen's frustration in
getting as much data is something that we are in essence
looking forward to as well. We want to see openness because it
opens competition and it opens the sense of the kinds of issues
and concerns that this subcommittee have.
Mr. Carney. Thank you. Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman. I only have one
question. I want to go back to something Mr. Amey made
reference to a little while ago when he said that there are
some folks who were offering seminars on how to get around
competitive bidding. Tell me about this. Who is doing that?
Mr. Amey. I can send you a list, but there are certain
Beltway bandits out there that offer seminars and Government
officials attend them, contractor employees attend them and one
of the ones I have says avoid competition like the plague. We
have seen different aspects of using small businesses, a lot of
the ANCs--I won't say a lot. But there are been certain ANCs
that have been used as a pass-through for larger contractors as
a way to avoid competition, although everybody wants
competition. It is funny, when I attended--I attended nearly
all----
Ms. Madsen. All.
Mr. Amey. All the panel discussions. Nearly all. I had a
very good attendance record. I will say it was very funny to
hear some of the larger corporations when they were buying and
they were buyers, they were talking about competition is
essential, market research is essential. But when they are
selling to the Government and they are on the other side, at
that point we are not using the same measures that they were
using as buyers. That is a little scary. It was people that we
have very large contracts with.
Mr. Rogers. I would love it if you would forward that list
to the committee. I am sure the Chairman would like to see it
as well. That is all I have, Mr. Chairman.
Mr. Carney. Thank you, Mr. Rogers. Would you like to go,
Mr. Pascrell?
Mr. Pascrell. If you permit me, Mr. Chairman.
Mr. Carney. You are permitted, sir.
Mr. Pascrell. Thank you, sir. I wanted to just briefly tell
the panel I think that most private contractors are hard-
working, decent human beings, by the way, and I think you feel
the same way. Unfortunately, many who aren't fitting in that
category do business with the Government and that is the
problem. So, Ms. Madsen, I have a question for you. Previously
reports have stated that over 50 percent of the dollar value of
the Department of Homeland Security contracts was awarded
without full and open competition. Fifty percent. How is this
able to happen and what is being done to ensure that contract
awards are made through a fair and open process?
Ms. Madsen. We talked about this, I think, a little bit
before you came in, but the data that the acquisition advisory
panel developed Government-wide probably is not inconsistent
with that number. We saw in 2004, 36 percent of contract awards
were not competitive. We saw one offer of contracts increasing
to about 20 percent--or by 20 percent--or to 20 percent I
should say and we couldn't get reliable data on awards under
large multiple-award IDIQs, so that number wouldn't surprise me
as a Government-wide number. I think what has happened though
in the intervening 2 years is that more protections have been
put in place.
So FPP has issued a strong competition policy. The 2008
Defense Authorization Act put in place more protections for
award of task and delivery orders under IDIQs, including the
ability to protest those awards and better data collection.
So there are steps that have been taken and there is
pending legislation that would implement other of the
acquisition advisory panel recommendations with respect to
increasing competition. So those steps are being taken. So I
would say that number for DHS, if you are looking at 2004-2005,
that is probably not out of line with the rest of the
Government would be my guess.
Mr. Pascrell. Whose responsibility would it be to make sure
that there is proper data? Who has ultimate responsibility for
accumulating the data which you referred to in your
presentation a moment ago?
Ms. Madsen. GSA collects that data under a contract, what
is called the Federal Procurement Data System, FPDS, which is
actually the baseline for the new FADA data as well. So they
collect data from all the agencies based on their contract
awards. It is pretty intensive, but it doesn't pick up every
detail.
Mr. Pascrell. Well, 50 percent is more than every detail.
Ms. Madsen. Well, it doesn't pick up details, at least it
didn't at the time and I don't think it does yet, about these
awards under multiple-award IDIQs. That is where the biggest
gap is.
Mr. Pascrell. Is that simply because--my final question--is
that simply because they don't have the means to get the data?
Is the data being withheld? What are the reasons?
Ms. Madsen. What we were able to determine----
Mr. Pascrell. I mean, we are talking about a lot of money
here.
Ms. Madsen. They didn't ask the question about the orders
under IDIQs. The system was geared to get contract information,
not order information. The orders under those vehicles grew
very rapidly between, like, 2000 and 2004.
Mr. Pascrell. Thank you very much.
Thank you, Mr. Chairman.
Mr. Carney. Thank you, Mr. Pascrell.
No more business before the committee, we stand adjourned.
Now, please be reminded that we may have written questions,
and we would like a prompt reply.
This committee stands adjourned.
[Whereupon, at 4:08 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Questions From Ranking Member Mike Rogers of Alabama for Richard K.
Gunderson, Deputy Chief Procurement Officer, Department of Homeland
Security
DHS ACQUISITIONS TRAINING PROGRAMS
Question 1. In your prepared statement (p. 7) you discuss the
Acquisitions Professional Career Program. Can you update us on the
current status of the Department's Acquisitions Training programs?
Answer. While the initial focus has been on the certification
standards and training development needs for contracting and program
management, the Office of Chief Procurement Officer (OCPO) mission
expands beyond those initial career fields and will ultimately address
multiple acquisition career fields, including systems engineering,
logistics and test and evaluation. The Acquisition Workforce Branch,
within the OCPO, was funded a centralized acquisition work force
training fund beginning in fiscal year 2008. OCPO has established a
three-tiered approach for the centralized acquisition training program
that includes: purchasing commercial-off-the-shelf courses; developing
partnerships with other Government organizations such as the Federal
Acquisition Institute (FAI) and the Defense Acquisition University
(DAU) in order to leverage off already existing acquisition courses;
and, developing DHS-specific classes in Acquisition. As with all new
starts, the fiscal year 2008 continuing resolution impacted the
centralized Acquisition Training Program. However, even with a late
start, DHS was able to complete and field two new program management
courses in partnership with DAU and fund the continuing development of
three others that will be available in fiscal year 2009. Also, DHS was
able to leverage its partnership with DAU and send DHS students to
program management courses at DAU during fiscal year 2008. DHS started
the development of five DHS-specific continuous learning modules and
workshops, two of which were piloted in the last quarter of fiscal year
2008 and three additional that will be ready by the end of the first
quarter of fiscal year 2009. The Continuing Resolution had the most
impact on the DHS's training strategy that was primarily based on
commercial-off-the-shelf training which would be provided by vendors.
As a result of the CR, DHS was not able to provide as much training as
originally planned and relied more heavily on training available for
other sources such as FAI and DAU. During fiscal year 2008 and into
fiscal year 2009 the career development and training branches are
working intently to build the infrastructure necessary to support the
acquisition work force training needs including the establishment of a
separate Training Office within the Acquisition Workforce Branch
including such functions as forecasting needs, quota management/
distribution, and registration.
Question 2. How do you think that, over time, this program will
improve oversight of the Department's acquisitions?
Answer. Direct oversight of programs and contracts is accomplished
by Component acquisition professionals. OCPO is responsible for
establishing the certification and training criteria to ensure they
possess the requisite knowledge, skills and abilities to perform their
functions. Program Managers, Contracting Officers, Contracting Officers
Technical Representatives, and other acquisition career fields work
together as an integrated team to ensure the successful execution of
the program and ensure that the terms of the contract are met. OCPO
will include all the disciplines necessary to achieve this end goal in
its acquisition work force. This will include the development of
certification programs for other such disciplines as Test and
Evaluation, Systems Engineering, Logistics, etc. Certification programs
include requirements for education, experience and training to ensure
that all competencies required to successfully perform the respective
acquisition function will be met.
To achieve this goal, the centralized training program is designed
to train the totality of the acquisition work force to be adaptive to
the Department's needs through the 21st Century and close any critical
skill gaps; these gaps are identified in the competency surveys as
administered by the Office of Federal Procurement Policy within the
Office of Management and Budget or are found through internal reviews
and audits as well as recommendations from the General Accounting
Office and DHS Inspector General. A key enabler to the acquisition work
force's ability to making good business decisions in support of our
Acquisition Programs is to have highly skilled and well-trained
individuals in the decisionmaking roles. This strategy also includes
the development of DHS certification standards broadening from solely
Contracting and Program Managers into other areas of specialized
acquisition knowledge, such as test and evaluation, systems
engineering, and business cost financial estimating.
In addition to the direct oversight being performed by the
components, the CPO, in coordination with other Departmental
executives, oversee program execution through the Acquisition
Management review process. Programs are required to seek various
approvals from the Department prior to execution. For example, Level I
programs require an Investment Review Board, chaired by the Deputy
Secretary, at key decision points in the acquisition life cycle. The
Department has also implemented new Periodic Reporting of key program
metrics to monitor cost, schedule and performance measures of select
programs.
Question 3. Have you had difficulty filling all the available spots
in the DHS Acquisition Fellows Program and the Acquisitions
Professional Career Program?
Answer. The Acquisition Workforce branch within the Office of the
Chief Procurement Officer has developed and implemented a vigorous
recruitment strategy, targeting diversity, veterans, and universities
across the continent for the Acquisition Professional Career Program
(APCP). Since the APCP was a fiscal year 2008 startup the continuing
resolution caused an initial pause in hiring. As with all new starts
several challenges emerged in the actual hiring and security processes.
However, we were able to meet a target of 49 hires, and we currently
have 48 on-board. We anticipate meeting our fiscal year 2009 goal of 52
additional hires, bringing the grand total of participants to 100.
Question 4. What are the parameters of this program? After
training, are ``students'' required to work at the Department for a
number of years or are they free to depart for higher paying private
sector jobs?
Answer. The APCP is designed to be a 3-year entry level program
targeting GS-7s, using the Federal Career Intern Program Hiring
authority. Each participant in the contracting career field will be
given an opportunity to complete three, single-year rotations through
separate components aiding in the development of a ``one DHS'' culture.
Throughout the 3 years the participants will be provided all the
necessary certification training and experience to become Level II
certified. The participants will also receive additional training in
leadership and other competencies for successful performance, such as
business writing, customer service and project management. Participants
are also paired with a mentor through a formal centralized mentorship
program.
The participants of the APCP program are held to the same standard
and regulations as any other Federal employee. They are bound by a time
commitment of 3 years which is tied to a recruitment bonus which is
given at the beginning of the commitment. If the participant is offered
and accepts a recruitment bonus they must remain for 3 years or pay a
prorated portion of the bonus back to the Treasury. Similar Federal
guidelines for training and educational benefits received apply.
Question 5. One of the challenges noted in the past has been the
limited number of contracting professionals on board to support the
programs. How has the CPO and the various DHS contracting organizations
addressed this problem?
Answer. DHS has addressed this challenge by utilizing the statutory
authority to re-employ annuitants and position them to serve as mentors
for the APCP participants. Also, each Head of Contracting for
procurement signs an agreement to ensure that the participants of the
program receive and are provide an adequate amount of supervision and
guidance to develop them to become the future leaders within DHS.
Question 6. In your prepared statement you discuss the aging
acquisition work force Government-wide (p. 7). Moving forward, it
appears this will be a challenge for all Government agencies. In your
opinion, what steps can the Federal Government take to ensure a strong
acquisition work force in the coming decades?
Answer. Actions that could be taken to ensure a strong acquisition
work force for the future include: continuing to support agency-
specific programs such as the Acquisition Professional Career Program;
allowing agencies to continue to exercise available flexibilities such
as re-employed annuitants and direct hire; as well as, permitting
flexibilities such as special pay without having to expend significant
effort in order to request this. Another significant improvement would
be to encourage the Office of Personnel Management to consider the
contracting career field to be professional vice ``administrative''
since there is a positive education requirement associated with the
1102--Contract Specialist.
Question 7. Can you give an example of successful contracts at the
Department?
Answer. The following examples demonstrate capability being
delivered in support of the Department's missions:
Nurse Case Management
The contract supports the Transportation Security Administration
(TSA) in the management of an estimated 18,000 workers compensation
claims arising from security screening and other work activities.
Services include expertise to determine if medical intervention is
required and provide nurse and medical case management services to
ensure appropriate medical treatment is being provided to security
screeners and other TSA employees. Also, the contractor assists in
identifying suspicious or fraudulent claims, tracking trends and
providing recommended process improvements in operations that may help
reduce injuries and associated claims. The impact has been a
significant decrease in the amount of long-term injury reports and a
significant decrease in the number of days injured employees are out of
work. The contractor has significantly reduced the number of
longstanding workers compensation claims, which has assisted TSA in
reducing its overall number.
National Voluntary and Abandonment and Hazardous Material Disposal
This contract provides environmental management services to TSA to
ensure the environmentally compliant management, collection, storage,
packaging, transportation and disposal of hazardous materials
voluntarily abandoned at airport security checkpoints and other TSA
facilities, and other hazardous wastes generated by TSA. The contractor
is responsible for providing management and support services,
collection containers, container identification and marking, labeling,
packaging, shipping, and final treatment/disposal for material
collected in support of compliant disposal of hazardous voluntarily
abandoned property at all TSA facilities, focusing on Federalized
airports.
The impact has been a reduction in the amount of abandoned items
stored at the airports resulting in hazardous conditions such as
collected fumes from abandoned lights, corroded batteries and leaking
aerosols. The contract requires compliance with Federal, State, and
local environmental laws and regulations. As a result, the contractor
bears full responsibility for removal and destruction of said materials
in a safe and environmentally compliant process, and assumed total risk
in regards to environmental violations. In regards to non-hazardous
material that are abandoned, those items are collected and donated to
State Agency Surplus Program Offices that may sell or donate items to
local non-profits, etc.
Electronic Detection Systems--CTX 9000/CTX 9400
TSA negotiated the purchase of the CTX 9000/CTX 9400 Electronic
Detection Systems, resulting in significant cost savings, product
improvements, increased extended warranty, and an incentive fee for
improved reliability of selected CTX 9000 units. After extensive
negotiations, TSA negotiated a 9 percent reduction in unit price from
the proposed amount, and built in an incentive to motivate the
contractor to successfully reduce the Mean Time Between Critical
Failure (MTBCF) of the equipment. The reduction of MTBCF is expected to
enhance operations at the airports Nation-wide and result in lower
future maintenance costs. This award also incorporated payment terms
where the contractor would only receive payment if the MTBCF for a
selected population of CTX 9000 improves after 18 months. Additionally,
TSA obtained an extended warranty for an additional 5 months or 150
days from the day of factory acceptance test.
Aircraft Cabin Training Simulators (ACTS)
After a successful solicitation and evaluation, Newton Design and
Fabrication, Inc.--a HubZone business located in Catoosa, OK--was
awarded a contract for Aircraft Cabin Training Simulators (ACTS). Two
delivery orders initiated at award provided for four simulators: a
double-decker hybrid unit (747 on top/767 on bottom) and a 737 single
unit for the Federal Air Marshal Atlantic City Training Center (FAMTC);
and a dual hybrid unit (737 on one side/767 on the other) for the
Federal Flight Deck Officer (FFDO) Dallas training office. These
simulators will serve many purposes for FAMTC, FFDO and Crew Member
Self Defense (CMSD) Training. The contract allows for future simulator
purchases as well as accessory components as needed. This award will
benefit TSA by providing a realistic aircraft training environment that
allows for multiple training scenarios and use by the FAMS, FFDO's and
Flight-Crew Members. These state-of-the-art units were specialized to
withstand the ballistic requirements of the training ammunition and
dynamic training environment, be readily maintainable throughout their
life cycles, and can be moved, enhanced, and reconfigured to adapt to
changes in the training programs.
HC-144A ``Ocean Sentry'' Maritime Patrol Aircraft
An integral piece of the Coast Guard's Deepwater Major Acquisition
Program, the HC-144As will replace the Service's aging fleet of HU-25
Falcon jets. The HC-144A is a derivative of the EADS/CASA CN-235-300
and significantly enhances the mission execution capability of Coast
Guard aircrews. This fixed-wing turbo prop aircraft will perform
various missions, including maritime patrol, law enforcement, search
and rescue, disaster response, and cargo and personnel transport.
Additionally, the ``Ocean Sentry'' provides the added operational
capability of a hydraulic-operated rear ramp, with superb fuel
efficiency--consuming less fuel than the HU-25 or HC-130. The HC-144A
project calls for delivery of 36 aircraft. To date, the Coast Guard has
accepted delivery of the first five HC-144A aircraft, with an
additional three on contract for delivery.
HH/MH-65C ``Dolphin'' Multi-Mission Cutter Helicopter
The HH/MH-65C helicopter conversion project adds equipment,
including two Turbomeca Ariel 2C2-CG turbo shaft engines, armor, gun
mounts, weapons and ammunition for AUF. The new engines provide
approximately 40 percent more power than those they replaced, enabling
improved reliability, endurance payload and performance. The HH-65Cs
will also have improved C4ISR electronic equipment suites; and day-
night/all-weather capability with radar and electro-optic/infrared
sensors. Improved mission capabilities include the ability to provide
surveillance and to apply force against a maritime target up to 150
nautical miles from a host cutter. To date, all 97 HH-65s have been re-
engined, upgraded and converted to the HH-65C configuration at the ARSC
in Elizabeth City, N.C., and at an American Eurocopter facility in
Columbus, Miss.
SBINET: PROJECT 28
Question 8. In hindsight, is it accurate to say that the Department
benefited from the fact that Project 28 was a performance-based
acquisition?
Answer. A performance-based contract is an appropriate tool to
accomplish the SBInet goal of integrating new and existing border
technology into a single, comprehensive border security system that
will enable Customs and Border Protection (CBP) to more effectively
detect, identify, and respond to incursions at the border.
Specifically, SBInet is being developed through a series of
performance-based task orders that allow the Government to identify the
outcomes/results that the contractor must achieve and requiring the
contractor to deliver a solution which demonstrates the stated
objectives. CBP sets the performance requirements for the project and
Boeing develops the approach to meet these requirements, maximizing the
use of commercial off-the-shelf technology and innovative solutions.
Project 28 was designed to test the initial suite of SBInet
capabilities under a pilot or prototype effort as the system's
technology foundation. Project 28's proof of concept was intended to:
(1) Demonstrate the feasibility of Boeing's SBInet solution; and, (2)
establish baseline performance characteristics against the SBInet
performance targets included in the master contract. By using a fixed-
price performance based contract with specific measureable outcomes,
the Government was able to evaluate the technical approach,
achievability, and feasibility of Boeing's overall SBInet solution on a
small scale with limited financial exposure. This approach provided a
number of lessons learned that will be implemented in future segments,
ultimately improving performance, reducing risk, and improving cost
performance.
ACQUISITION MANAGEMENT
Question 9. Could you provide some background on what the
Department has done to ensure that contractors are not affecting
inherently governmental decisionmaking or influencing long-term DHS
policy?
Answer. At the Department of Homeland Security (DHS) and across the
Government, there is a need to be increasingly sensitive to
organizational conflicts of interest issues that may arise through
contracting for services and products. Across the board, contractors
bring a wealth of cost-effective and often unique experience,
information, management and technical skills to the Department. As a
result, DHS relies on contractors to perform mission support
requirements and relies on those same skills and capabilities to
provide required technical assistance in the preparation, review and
administration of many contracts. However, DHS has been very careful
not to allow contractors to perform inherently governmental oversight
functions or other inherently governmental functions, such as
determining contract requirements. For example, at DHS, all warranted
Contracting Officers and all Contracting Officers Technical
Representatives (COTRs) are considered inherently governmental. These
capabilities are sometimes supplemented by qualified contractors that
have been cleared of potential conflicts-of-interest.
The Office of the Chief Procurement Officer (OCPO) has taken steps
to issue policy on this topic and integrate it into the training of
acquisition personnel. The Office of Federal Procurement Policy (OFPP)
Letter 93-1, Management Oversight of Service Contracting, is
disseminated and discussed during the DHS training for Contracting
Officers and Contracting Officer Technical Representatives. DHS
officials have coordinated with the Defense Acquisition University's
course director for COTR training to ensure that coverage of OFPP
Letter 93-1 is included in training at the university.
On March 6, 2008, then Deputy Under Secretary for Management,
Elaine Duke, issued the annual DHS Federal Activities Inventory Reform
(FAIR) Act (Pub. L. 105-270) data call to Heads of DHS Headquarters and
Component organizations. That data call requested DHS Components to
review both their in-house and contract mission and administrative
workload to be sure that contracts awarded as a part of our stand-up
may not now be more appropriate for recurring performance by Federal
employees. We specifically asked the Components to be sure that
inherently governmental work and minimum residual core capability
requirements (FAIR Act commercial function Reason Code A) had not been
outsourced.
We consider this review to be an important part of our work force
planning effort and have included it into the DHS Workforce Planning
Guide, to assure that short- and long-term work force and skill gaps
are being met. In accordance with the Secretary's goal to strengthen
and further unify our capabilities, we are continuing to ensure that no
inherently governmental work has been awarded to contract. To date, we
have found no instances of contracting inherently governmental work nor
have we identified any work that would be justified for conversion to
in-house performance on a solely economic (cost) basis. We have,
however, found several instances where work is being converted from
contract to in-house performance to assure that minimum core
capabilities are being met and, in some instances, to permit the full
(better) utilization of other Federal positions that are engaged in
inherently governmental work. At NPPD, for example, approximately 250
Full-Time-Equivalents (FTE), to include budget, financial, program and
technical operations management support, have been scheduled for
conversion to in-house performance.
Question 10. What controls are currently in place and/or being
instituted to monitor the entire life cycle of new and existing
programs?
Answer. One of the OCPO's priorities is Quality Acquisition
Management, focused on strengthening program management, cost analysis,
logistics, systems engineering and test and evaluation. In support of
this priority, OCPO initiated an Acquisition Re-Engineering effort
which examined component and departmental acquisition program controls
and monitoring. Results include of this effort include:
Expanding Departmental Acquisition Staff.--DHS established a Senior
Executive-led Acquisition Program Management Division (APMD) within the
Office of the Chief Procurement Officer. APMD currently has nine staff
positions, and is approved to increase to 18 staff in fiscal year 2009.
DHS has also established a senior executive-led Cost Analysis Division
(CAD) within the OCPO to provide cost estimating guidance and to
provide oversight of program cost estimates. CAD currently has three
staff positions, is approved to increase to six members.
Improvement of the Existing Investment Review Board Process.--To
focus on up-front identification and staffing of program issues, thus
focusing the Investment Review Board (IRB) discussion on program
execution and challenges. The Acquisition Decision Memorandum resulting
from the IRB is similarly focused on providing program direction and
assigning specific actions required to resolve these issues.
More Reviews Conducted.--During the period from September 2007 to
the present, APMD has conducted 37 quick-look program reviews, two
Independent Review Team level program reviews, and piloted a much
improved IRB process. As of the end of September 2008, eight IRBs have
been conducted, with eight more scheduled through December 2008.
Revision and Expansion of the DHS Periodic Reporting System.--The
revised system is centered on the parameters established in the
Acquisition Program Baseline, but includes other commonly accepted best
practice metrics, such as standardized Earned Value Metrics, and a
Probability of Program Success assessment technique modeled after
similar systems at DoD, USCG, and other agencies. It will also record
and track ADM actions.
Significant Revision to the Department Acquisition Policy and
Process (APB).--APMD has created a new Acquisition Directive (102-01),
accompanied by an Instruction (120-01-001), that replaces Directive
1400 and lays out a comprehensive acquisition lifecycle framework and
acquisition policy and process. Supporting the instruction are
appendices providing detailed information on critical acquisition-
related products and processes. These are scheduled for interim
implementation during first quarter fiscal year 2009.
Strengthening of Program Acquisition Program Baselines.--APMD is
working with individual Level I program offices to strengthen APB;
which document a program's cost, schedule and performance metric's
thresholds and objectives. This effort involves a collaborative
headquarters/program review which results in consistent definition of
the program's cost, schedule and performance parameters, along with
development of quantifiable metrics from which progress can be measured
and assessed. The program leaves the process with an APB improved in
both format and content.
Improved Life Cycle Cost Estimating.--The Cost Analysis Division is
focused on instilling best cost estimating practices using the
Government Accountability Office Cost Estimating Guide as the
benchmark. The goal is to develop credible and supportable program and
project cost estimates to support budgetary decisions. Once programs
have well-defined and documented cost estimates they serve as the
foundation and basis for the periodic reporting system. We are
initially incorporating this capability at all development and
production decisions for all Level I programs.
HURRICANE IKE DISASTER RELIEF AND TEMPORARY HOUSING CONTRACTS
Question 11. Can you describe what acquisition control structures
are in place, particularly at FEMA, that will ensure taxpayer dollars
are not wasted during the Hurricane Ike relief efforts?
Answer. The Federal Emergency Management Agency (FEMA) continues to
build their acquisition community and acquisition control structure by
taking the following measures:
Enhanced Acquisition Capability and Capacity.--FEMA's Office of
Acquisition Management has grown from a staff of approximately 35
Contracting positions to approximately 235 Acquisition professionals.
The office has also matured through the creation of three separate
branches that support the acquisition life-cycle and provide the
framework for FEMA's acquisition processes and practices. The
Acquisition Operations Branch provides pre- and post-award contracting
and acquisition support and includes a staff of approximately 180
Contracting Officers, Contract Specialists, Procurement Analysts, and
Support Staff.
Pre-Positioned/Pre-Competed Contracts.--FEMA has implemented
several pre-positioned contracts in response to the need for advance
planning and preparation. FEMA currently has approximately 75 pre-
positioned contracts in its inventory. In response to the recent
Hurricanes, FEMA activated its ground and air ambulance evacuation
services contract with American Medical Response, Inc. and its rail
evacuation services contract with AMTRAK. These are examples of
successful, pre-positioned contracts for disaster and emergency
response.
Increased Contracting Visibility in the Field.--When the scale of a
disaster merits increased on-sight oversight of field operations, FEMA
designates and deploys an Acquisition Advisor to the Joint Field
Office. This role has been utilized in response to both Hurricanes
Gustav and Ike. The purpose and role of the Acquisition Advisor is to
counsel the Federal Coordinating Officer (FCO) on the acquisition
process and regulations, and provide oversight to ensure internal
controls are in place and protocols are followed to avoid fraud, waste,
abuse, and unauthorized commitments. The advisor also reaches back to
the Headquarters office to ensure greater coordination of effort and
use of FEMA acquisition staff both from Washington, DC and in the
field. Recently, due to the increased staffing levels, FEMA was able to
pre-deploy contracting professionals in advance of declared disasters
events. This enabled the acquisition staff to be prepared to respond
and provide immediate support to the field operations staff--while the
FEMA contracting staff at Headquarters executed against the pre-
positioned contracts for other mission needs. Additionally, Contracting
Officers were deployed with FEMA's Incident Management Assistance Team
and Urban Search & Rescue teams--providing direct support to those
teams as part of each team.
Enhanced Contract Oversight.--FEMA has developed a robust COTR
program that tracks and monitors the skill levels of personnel trained
as COTRs, enables FEMA's programs and COTRs to quickly identify
personnel with the appropriate COTR skills, and provides the necessary
support to the COTRs as they perform their job duties. Currently, there
are 1,008 certified FEMA COTRs. FEMA is also implementing an initiative
to tier the COTR certification process, which recognizes that not all
COTRs are alike and that certain contracts require COTRs with higher
skill levels and experience to ensure proper contract oversight.
Finally, to ensure a more controlled requirements development process,
the approvals levels for high-value procurement requisitions now
require a higher level signature authority within FEMA than previously
required; this has helped to validate the requirements before they come
to the acquisition office for contract action.
In addition, within the OCPO, there are three interrelated missions
that provide an acquisition control infrastructure. First, the Head of
Contracting Activity Desk Officer branch maintains cognizance of key
acquisition activities and resolving issues associated with complex,
multi-billion dollar program investments by providing support to the
Component's Head of Contracting Activity and their staff. Second, the
Acquisition Oversight branch has undertaken activities to verify the
integrity of DHS procurement practices that will lead to strengthening
DHS' ability to ensure an effective and accountable acquisition
function. Third, the APMD provides outreach support to the Department's
program offices to ensure the application of sound program management
principles. Since its creation, the division has worked collaboratively
with representatives across the Department to develop a revised
Acquisition Management framework that will provide the governance of
DHS' investment programs. This effort, combined with a revised
requirements process that APMD is formulating will serve as the
foundation of DHS' investment decision process. To ensure that taxpayer
dollars are not wasted during on-going relief efforts for Hurricane
Ike, OCPO has actively been participating in FEMA Contract Review
Boards (CRBs), to ensure that the requirement is adequately defined,
and documents comply with the FAR and DHS regulations, policies,
procedures, and practices.
Question From Ranking Member Mike Rogers of Alabama for James L.
Taylor, Deputy Inspector General, Department of Homeland Security
HURRICANE IKE DISASTER RELIEF AND TEMPORARY HOUSING CONTRACTS
Question. Are you confident that DHS and FEMA are better equipped
to oversee disaster relief contracts during the current crisis?
Answer. We are confident that FEMA is better equipped now to
oversee disaster relief contracts than it was in the wake of Hurricane
Katrina. However, we believe there is still considerable room for
improvement before we can be assured that FEMA is fully prepared to
provide needed disaster relief while providing good stewardship of
taxpayer funds.
As of October 9, 2008, FEMA obligated $196,688,827 through 232
contracts for Hurricane Gustav and obligated $216,340,900 through 245
contracts for Hurricane Ike. This includes contracts for services, such
as catering for first responders, janitorial services at special needs
shelters, and installation of temporary housing units, as well as
contracts for commodities such as meals, water, and tarps.
In past reviews, we found that FEMA's acquisition function suffered
from shortcomings in several areas, including work force, information
systems, and post-award oversight. While FEMA has made improvements in
these areas and continues to strengthen its acquisition function, there
is much work still to be done.
When the 2005 Gulf Coast hurricanes struck, FEMA's acquisition work
force consisted of just 42 employees. FEMA now has more than 126
acquisition-related positions filled and is authorized to fill 155
positions. FEMA needs to fill all of its authorized positions and
ensure that the acquisition work force is fully trained to carry out
its duties.
Another area where FEMA still has work to do is in the systems it
uses to support the acquisition function. In April 2007, we reported
that FEMA was using outdated and nonintegrated information systems.
FEMA officials told us they were putting into place the PRISM contract
writing system and that this would improve their ability to award and
track disaster contracts. FEMA told us it expected to begin using PRISM
in February 2008, but this has not yet happened. FEMA continues to use
its outdated systems, limiting its ability to manage disaster contracts
and protect against waste, fraud and abuse.
FEMA must also continue to improve the contracting officer's
technical representative (COTR) function. COTRs provide important
programmatic oversight for disaster contracts. FEMA is currently
engaged in developing and implementing stronger COTR requirements and
better training, and it is critical that FEMA continues these efforts.
Our office plans to work in this area in 2009.
Questions From Ranking Member Mike Rogers of Alabama for John P.
Hutton, Director, Acquisition and Sourcing Management, Government
Accountability Office
SBINET: PROJECT 28
Question 1. Is Project 28 an example of the benefits of
performance-based contracting in the sense that risk is assumed by the
contractor and it is ultimately responsible for cost overruns?
Answer. We reviewed the performance-based characteristics of
SBInet's Project 28 in GAO-08-263: Department of Homeland Security:
Better Planning and Assessment Needed to Improve Outcomes for Complex
Service Acquisitions. A performance-based approach includes: A
performance work statement that describes outcome-oriented requirements
in terms of results rather than the methods of performing the work;
measurable performance standards describing how to measure contractor
performance in terms of quality, timeliness, and quantity; and the
method of assessing contractor performance against performance
standards, commonly accomplished through the use of a quality assurance
surveillance plan. These characteristics, if properly implemented, can
help ensure that services meet cost, schedule and performance
requirements, thereby reducing risk to the Government and improving
service acquisition outcomes. To further minimize the Government's
risk, Federal procurement law establishes a preference for using firm
fixed-price contracts or task orders--where a specific price is paid
regardless of a contractor's incurred costs--when using a performance-
based approach. While we reported that SBInet's Project 28 did not
incorporate all performance-based characteristics, such as well-defined
requirements and a complete set of measurable performance standards, it
was structured as firm fixed-price, and the Government was not
responsible for costs incurred by the contractor over the original
contract amount.
LINE AUTHORITY
Question 2. In your reviews of the Department's acquisition and
contracting programs, do you see the lack of line authority in the
procurement functions of the Department as a problem? If so, what
solutions do you recommend?
Answer. DHS's acquisition function relies on a structure of dual
accountability, and cooperation and collaboration among DHS components
to accomplish the Department's goals. Each component procurement
organization has a Head of Contracting Activity who reports directly to
the component head and indirectly to the Chief Procurement Officer
(CPO). While this structure was intended to make efficient use of
resources Department-wide, it leaves unclear the CPO's enforcement
authority over the components. For example, DHS's Acquisition Line of
Business Integration and Management Directive created unclear working
relationships between the CPO and the DHS component heads and does not
apply to the Coast Guard or Secret Service. Our prior work has found
that in a highly functioning acquisition organization, the CPO is in a
position to oversee compliance with acquisition policies and processes
by implementing strong oversight mechanisms. In March 2005, we
recommended that the Secretary: Provide the CPO with sufficient
enforcement authority and resources to provide effective oversight of
DHS's acquisition policies and procedures; and revise the Management
Directive to eliminate the exemption for the Coast Guard and Secret
Service. In September 2006, we reported that the Secretary had not
taken action to ensure Department-wide acquisition oversight, and we
included a matter for consideration to the Congress to require the
Secretary to report on efforts to provide the CPO with such authority.
In our June 2007 review of the Department's acquisition oversight
program, we reported while the CPO can make recommendations based on
oversight reviews, the component head ultimately determines what, if
any, action will be taken. DHS stated in June 2007 that they were in
the process of modifying the Acquisition Line of Business Integration
and Management Directive to ensure that no acquisition organization is
exempt; however, this directive has not yet been revised.
Question From Ranking Member Mike Rogers of Alabama for Marcia G.
Madsen, Chair, Acquisition Advisory Panel
GROWTH OF GOVERNMENT CONTRACTING AND THE ACQUISITION ADVISORY PANEL
REPORT
Question. What are the implications for the acquisition system as a
result of the growth in the Government's purchase of services?
Answer. Response was not received at the time of publication.
Question From Ranking Member Mike Rogers of Alabama for Scott Amey,
General Counsel, Project On Government Oversight
GROWTH OF GOVERNMENT CONTRACTING AND THE ACQUISITION ADVISORY PANEL
REPORT
Question. In your opinion, what can this Congress and the next
administration do to limit contract abuse and mismanagement?
Answer. On October 20, 2008, POGO recommended good Government
reforms for the Presidential transition teams. These recommendations
are applicable to actions that could be taken up in the 111th
Congress--actions for improving the Government work force, contract
spending, transparency, and accountability. POGO believes that the
implementation of the attached recommendations will help put the
country on the right track to a more effective, accountable, open, and
honest Government--one that is truly responsive to the needs of its
citizens.
Attachment
RECOMMENDATIONS FOR TRANSITION TEAMS
Over the past 27 years, the Project On Government Oversight (POGO)
has worked toward achieving a more accountable Federal Government.
During that time, POGO has enjoyed a strong working relationship with
your Senate office [Senator McCain and Senator Obama] working toward
this goal, and thanks you for your efforts on Government reform issues.
If elected, your administration will need to make several reforms.
The implementation of the following recommendations will help put the
country on the right track to a more effective, accountable, open, and
honest Government--one that is truly responsive to the needs of its
citizens. Furthermore, while it is always a goal to have the best
possible Government at the lowest feasible cost, the financial crisis
our country faces makes it even more imperative that the next President
more effectively use Government resources. POGO believes our
recommendations will make significant strides toward shrinking the cost
of Government operations, while at the same time making them work
better. The initial costs of these reforms will be more than offset by
the long-term savings for the taxpayer.
We welcome the opportunity to provide more in-depth details about
our proposals.
Effective
Problem: Some Federal agencies are no longer accomplishing their
mandated missions. Other agencies are working toward missions that are
no longer relevant to 21st Century challenges. Agencies are already
engaged in strategic planning and self-evaluation through the
Government Performance and Results Act (GPRA) and Performance
Assessment Rating Tool (PART) processes. However, this information is
used infrequently. Furthermore, such efforts generally focus more on
quantifiable measures of success, and inadequately measure the quality
and relevance of the work of the agency--in other words the output of
an agency rather than the impact of its work.
POGO Recommends: The Presidential transition team should review
each agency by assembling agency-specific teams of long-time civil
servants, former political appointees from both parties, and
stakeholders of the agency's work to determine how well or how poorly
each agency is accomplishing its mission, and whether that mission
addresses modern public policy needs. In the first 100 days of the
administration, those teams should hold a public comment period and
regional town hall meetings to allow the public to voice grievances and
suggest improvements for the agency's operations. While it will also be
important to review the useful agency performance data collected
through GPRA and PART, it is essential to put that information in
context.
Problem: Essential public services that are arguably ``inherently
governmental functions'' are frequently privatized. POGO is concerned
that the aggressive outsourcing of Government functions may have
allowed private contractors to be in the improper position of advancing
private interests ahead of the public good.
POGO Recommends: The new President should make it a priority to
assess the extent to which outsourcing of previously governmental
functions has undermined accountability, effective management, and
policymaking in Federal agencies. Transition team members and new
appointees should review FAIR Act inventories, protests, and job
descriptions over the past decade, as well as interview career
employees and agency ethics officers, to identify instances of
improperly privatized inherently governmental functions. Regulations
need to be strengthened to prevent future instances of problematic
outsourcing, and any identified inherently governmental positions
should be promptly filled by public servants.
Problem: Some political appointees are undermining the
effectiveness of critical agencies. In fact, some political appointees
are inadequately qualified or not qualified at all for their positions.
Others might have the requisite administrative experience but do not
believe in the mission of their agency. Still others are negatively
qualified, having lobbied and worked to undermine or defeat the
missions of the agencies they have been appointed to lead.
POGO Recommends: The President should emphasize qualified and un-
conflicted experience when appointing individuals to office. The
President should also review whether a number of the current 4,000
political slots should be converted to civil service status in order to
enhance senior level institutional memory and competence at the agency.
Problem: The Federal Government is struggling to retain skilled
employees because those employees can frequently make more money doing
comparable work as Federal contractors. In some cases the Federal
Government expends resources to train an employee to work for an
agency, only to have that employee go through the ``revolving door'' to
work outside the Government for a contractor, private law firm,
industry association, or lobbying shop. As a result, the Government
ends up with ``brain drain'' while paying more for contractors to do
work that could have been done by Federal employees.
POGO Recommends: The President should change the culture of what it
means to be a civil servant in order to make Federal employment more
attractive to the most skilled individuals. Policies to consider
include changing pay scales to make them competitive with those in
equivalent private-sector jobs, instituting agency honors programs,
paying student loans in return for a period of civil service, allowing
retired civil servants to retain their pensions even if they are
rehired by the Government, and limiting the total cost paid by the
Government for a contractor employee performing the equivalent work of
a Federal employee. Recognizing that the contractor work force is a de
facto part of the Government, this effort should actually shrink the
total footprint of the Government.
Problem: Many Federal employees look the other way when they
recognize waste, fraud, mismanagement, and abuse because they lack
sufficient whistleblower protections against retaliation. Absent such
protections, the Federal Government cannot expect its employees to
disclose mistakes and practices that must be corrected in order for the
Government to operate efficiently and effectively.
POGO Recommends: The President should issue an Executive Order to
strengthen Federal employee whistleblower protections, including strict
administrative, civil, and criminal penalties for officials that
retaliate against whistleblowers. The Executive Order should also
include rewards such as commendations, public recognition, and monetary
awards for Federal employees who disclose waste, fraud, and abuse, or
who suggest ways to improve the operations of their agency.
Problem: Inspectors General (IG) have been encouraged through the
past two administrations to be part of the agency management team,
rather than to be ``junkyard dogs'' in seeking out waste, fraud, and
abuse at their respective agencies. As a result, some IGs have moved
more toward program management, rather than functioning as the
independent and objective watchdogs envisioned by the IG law.
POGO Recommends: The Executive branch should reinvigorate the
independence of Inspectors General by recognizing the need for them to
be strong in-house watchdogs, not an arm of agency management.
Accountable
Problem: Oversight functions at agencies across the Federal
Government have been decimated. Federal officials also lack the
enforcement tools needed to prevent, detect, and remedy waste, fraud,
and abuse in Federal spending. From the Department of Defense to the
Department of Interior and Food and Drug Administration, the offices
and functions that can prevent corruption, waste, and mismanagement
have been underfunded, defanged, or co-opted by the entities they were
intended to oversee.
POGO Recommends: While assessing each agency's operations, the
President should pay special attention to oversight offices--and
particularly the entity to whom those offices report--to ensure that
oversight functions are adequately independent, and that the offices
are afforded the resources, authority, and incentives to provide
rigorous oversight. The President should also implement the
recommendations contained in the National Procurement Fraud Task Force
Legislation Committee White Paper, in order to allow Federal officials
to hold recipients of Federal funds accountable.
Problem: The Federal acquisition work force is currently
overwhelmed and staff levels are inadequate to oversee Federal
Government contracts. Contracting dollars have doubled since the
beginning of the decade, yet the acquisition work force has remained
constant, and in some agencies is significantly smaller.
POGO Recommends: The President should expand the Federal
acquisition, auditing, and accounting work force in order to improve
oversight and promote integrity in Federal spending. Improving
oversight will enhance contract management, resulting in savings that
would more than pay for this expansion. A strong oversight work force
can help the Government get better returns for the taxpayer on goods
and services and also help prevent programs from falling behind
schedule and running over budget.
Problem: The Federal contracting system is prone to abuse and it
prevents Government officials from ensuring that taxpayers are paying
fair and reasonable prices for goods and services. Specifically, sole-
source contracts and contract bundling undermine competition and lead
to waste, fraud, and abuse. To receive quality goods and services at
the lowest practicable cost, the Government must encourage competition.
Contract bundling, where the delivery of many often-unrelated goods and
services are gathered under a single contract, dramatically reduces
competition and transparency in Government contracting.
POGO Recommends: The Government must eliminate or, at the very
least, limit the use of risky contracting vehicles and provide
contracting and program officers and oversight staff with the necessary
tools to effectively manage Government spending. The Government must
have contractor cost or pricing data so that it can make well-informed
spending decisions.
Government agencies should also conduct full and open competitions,
to the maximum extent practicable, for all non-urgent purchases.
Agencies should require genuinely competitive bids for task and
delivery orders before the contract can be considered ``competitive.''
Sole-source contracts should be used sparingly, and the Government
should ensure that non-competitive contract pricing is fair and
reasonable.
The Federal Government should avoid contract bundling in future
contracts in order to increase contracting competition. Agencies should
consider un-bundling existing contracts.
Problem: The Constitution assigns the President the responsibility
of enforcing laws passed by Congress, but the recent abuse of executive
signing statements has allowed the President to improperly infringe
upon the Congress's legislative role. These signing statements direct
agencies to ignore sections of the bills with which he disagrees,
generally asserting that those sections would present impermissible
constraints on the President's power as Commander-in-Chief. The
statements have very clearly ordered his subordinates at Federal
agencies not to obey more than 1,100 sections of different laws. Many
of these sections would have provided Congress and the public with
additional information and transparency about the activities of
executive agencies.
POGO Recommends: The newly elected President should rescind these
signing statements and pledge that if he strongly disagrees with
sections of a bill, he will veto it.
Open
Problem: Much information about Government operations is not made
readily available to the public. Members of the public must frequently
file Freedom of Information Act (FOIA) requests in order to learn about
the performance and actions of their Government.
POGO Recommends: As a matter of practice, the Federal Government
should place on-line all new Government-generated or Government-
collected information that is not exempt from FOIA. Furthermore,
instead of withholding an entire document that contains information
that cannot be released, the Government should release the document
with that information redacted. The Federal Government should
automatically post all this releasable information at publicly
available agency web sites.
All information released through FOIA should promptly be made
available on-line. This will decrease the need for duplicate FOIA
requests that now contribute to the large FOIA request backlogs.
Furthermore, agency budgets must allow for these changes, accounting
for increased staff to handle posting new agency information, as well
as providing adequate resources to support chronically under-funded
FOIA offices.
Problem: The Executive branch frequently overclassifies and uses
pseudo-classifications, such as Sensitive But Unclassified (SBU) and
Controlled Unclassified Information (CUI), to withhold information from
the public. Often the apparent reason is not the legitimate need for
secrecy, but the concealment of embarrassing information, including
mistakes.
POGO Recommends: The Executive branch should protect only
legitimate national security and privacy concerns, and it should
penalize agencies that violate these standards.
Problem: The Federal Government cannot make contractor
responsibility determinations. The Federal Government is the world's
largest consumer of goods and services. As such, it has tremendous
buying power to encourage good corporate behavior. However, the
Government lacks a system to ensure that contracts are awarded only to
responsible contractors, as is required by law.
POGO Recommends: The President should immediately implement and
fund the congressionally mandated database of information regarding the
integrity and performance of contractors, entities, and persons awarded
Federal contracts and grants. The database should detail the instances
in which contractors and grant recipients have defrauded the
Government, violated laws and regulations, had poor work performance,
or had their contracts or grants terminated for default. This database
should be made publicly available.
Problem: The Federal contracting and grant-making system is opaque.
The Government lacks rules to ensure that the contracting and grant-
making process is open to the public.
POGO Recommends: To restore public faith in Federal spending,
agencies should announce and promptly publish on-line all new and
existing contracts, grants, and task and delivery orders above
$100,000, as well as requests for proposals and solicitations, contract
or grant data, award decisions and justifications, audits, and other
related reports.
Honest
Problem: The revolving door between the Government and contractors
or regulated industries inevitably creates conflicts of interest and
undermines the public's faith in the Government. The revolving door
undermines the basic obligations of public service to place loyalty to
the Constitution, laws, and ethical principles above personal or
private gain.
POGO Recommends: The President should issue an Executive Order that
Executive branch employees, including political appointees, must
consider their position a matter of public trust and service, not a
stepping stone for personal gain. Once they leave Government service,
there should be a 3-year prohibition against public employees and
officials working for or representing industries or other private
interests that they regulated, contracted with, or otherwise oversaw.
Similarly, the President should exercise great caution in appointing
individuals with ties to the industry they will oversee. The Office of
Government Ethics and agency ethics offices should be given
administrative enforcement power over violations of ethics, as well as
the necessary resources to execute this new mandate.
Problem: Executive branch advisory committees have a large impact
on policy but are exempt from most ethics measures and restrictions.
This can lead to conflicts between public and private interests. Often,
advisory committee members--also known as ``special Government
employees''--work for the industries that benefit from the policies
they are recommending.
POGO Recommends: The next President should reconsider the Executive
branch's use of advisory committees. If such committees are to be
continued, they should include, but not unduly rely on, private
interests. The President should ensure that unclassified portions of
advisory committee meetings and minutes are available on the internet.
When Federal advisory committee members recuse themselves from any
discussion of matters in which they or their private employers or
clients have a significant financial interest, this disclosure or
recusal--including name, title, employer, and the specific nature of
the financial interest--should be filed with the Office of Government
Ethics and made publicly available.
Questions From Ranking Member Mike Rogers of Alabama for Marc A. Pearl,
President and Chief Executive Officer, Homeland Security and Defense
Business Council
DHS CONTRACTING PROBLEMS AND MOVING FORWARD
Question 1. What is the single most important thing DHS needs now
and for the next administration so it can work towards programmatic
success?
Answer. The Homeland Security & Defense Business Council believes
that there are a number of challenges and opportunities that the next
administration and the U.S. Department of Homeland Security can do to
ensure greater programmatic success, particularly in the area of
developing a better and more effective relationship with the private
sector. With regard to the theme of the hearing itself, the Council
would believe the underlying foundation of achieving greater
programmatic success is building on and further developing a mature
acquisition process that allows for and facilitates an open, honest and
professionally disciplined relationship to continue to exist between
the public and private sectors.
The Council supports the concept that a successful acquisition
process must begin earlier than contracting activity itself is
undertaken, as well as providing an open post-contract assessment
dialog focusing on lessons learned. Before the ``blueprint'' is drawn
up and after contract completion, experts on the ground and operational
practitioners in the field need to be assembled and questioned. A
successful process also requires equipping the entire team (contractors
and program managers) with an understanding of the challenges and risks
in place during the entire lifecycle of the project to ensure success.
Question 2. In your prepared statement you state that the Homeland
Security and Defense Business Council has offered to help DHS increase
the number of certified project managers by offering to fund a new
certification program through the Project Management Institute. What is
the current status of this program and has the Department ``cherry-
picked'' from it for the Acquisition Intern Program?
Answer. It is my understanding that when the Homeland Security &
Defense Business Council made its offer a few years ago to help
facilitate a process to assist in developing a stronger corps of
certified project managers the Department was going through a
cataclysmic personnel shift in its procurement office and was unable to
respond to the offer. We are currently unaware of any further progress,
but are attempting to work with the Department in order to see if our
help can be utilized in the future. It is our understanding that the
Acquisition Intern Program has been internally developed to increase
the number of quality project managers.
Question 3. Can you give an example of successful contracts at the
Department?
Answer. Each of our many members and many other companies have
numerous success stories throughout the Department, but to cite only a
few examples would be a disservice to our other members' successes.
Question 4. Can you describe the top two or three areas where your
members would want to see improved processes at the Department?
Answer. The Homeland Security & Defense Business Council and its
members support a process that mirrors this new environment and urges
that the Department embrace these priorities as it moves forward in
revitalizing it procurement process:
Quality Contracting.--The Council supports the May 2008 statement
of the bipartisan group of Senate Homeland Security & Government
Affairs Committee members that, together with Chairman Thompson, called
for more explicit requirements and performance standards in major
contracts to ensure successful outcomes.
Quality Acquisition Management.--The Council urges that the
Department continue to develop acquisition work force tools to forecast
needs and develop certification requirements. A new administration
working with a new Congress now has the opportunity to further improve
on procurement with sound program management, client-side support, and
the improvement of the acquisition work force by focusing on the
recruiting and training of more talented contracting officials. There
should be integrated project teams, led by the Government, but with
operational involvement of contractors.
Quality People.--The Council cannot emphasize enough the need to
increase the number of procurement officers with expertise in
technology, engineering and management to accomplish the complex
operational aspects of oversight and review.
Question 5. Have any of your members attempted to engage the
Department on their shortcomings and attempted to assist with best
practices?
Answer. Member companies are always informally engaging various
executives and program managers at the Department individually and as
members of the Council in order to find ways to be more successful
together. It is in everyone's best interest and all the parties agree
that projects are tailored to achieve success and that the goals and
mission of the Department are achieved in partnership with those in the
private sector who offer subject matter and project expertise. This
process and the overarching dialog that this question encourages may--
in the long run--require better and more formal communication,
coordination, and collaboration among the parties involved--Council
members, together with congressional leaders, operational experts in
the private sector on the ground, and DHS program/project managers--
working together to build off lessons learned in developing a more
transparent best practices approach to the contracting process.